YieldTalk news and links - 11 December 2021

New/Updated Platform Reviews

First National Realty Partners (FNRP) is a commercial real estate private equity firm that focuses on grocery-anchored commercial shopping centers, offering both investments in individual properties and an Opportunity Fund across all of their offerings. FNRP is vertically integrated, handling things like property management, leasing, and financing internally, which they say allows them to leverage a strong network of tenant relationships with major retail brands, such as Whole Foods, Kroger, and Shop-Rite. The target IRR on most offerings is 12-18%, open to accredited investors. Our rating: Excellent.

Notable offerings

YieldStreet (read our review) has launched Bonaccord Private Equity Fund I, which will seek to purchase equity stakes (also known as GP Stakes) in a diversified range of mid-size alternative asset management companies. Find out more at YieldStreet.

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🖼️ Masterworks (read our review) is offering an oil-on-canvas from Chinese-French artist Zao Wou-Ki. The painting was previously sold twice at auction. The first time it sold in October 2003 for $570,703, and then in November 2009 for $2,685,780 – a price appreciation of 28.6% annualized between the two sales. Find out more at Masterworks

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🎉 As a reminder, Hedonova is still offering YieldTalk readers a $50 sign-up bonus for new investments in their alternatives hedge fund, which is effectively an immediate 5% return on a $1,000 investment 📈. Click here to claim your $50 bonus 👈

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👋 Before you make your next investment, do what we do at YieldTalk and track your net worth and investment portfolio (including alternatives and crypto) in one place with Money Minx.

Worth Reading this Week

A roundup of insights and interesting links from around the investment crowdfunding ecosystem.

Alternative investment platform Republic (our review) continues their acquisition spree, this time announcing they are acquiring UK-based Seedrs, the largest investment crowdfunding platform in Europe. Seedrs also has a secondary market for private securities. The combined firm will have an investor community of more than 2M. Even as more new platforms launch, expect further consolidation as investors (especially institutional investors) look for one-stop shops across multiple asset classes. From the announcement:

Not only will geographic expansion be rapidly advanced, but both companies hope to bring their unique strengths to support and grow the business. Seedrs looks forward to learning from and adopting Republic’s expertise and advancement in crypto, real estate, gaming, and more types of investment offerings. Simultaneously, Republic is eager to expand across Europe, implement a secondaries market, and build on the strong community created by Seedrs.

Inflation watch

The Capital Spectator says inflation might, might be peaking, even as the Fed adjusts its language in expectation of price increases continuing into 2022:

As for this Friday’s update on November inflation, CapitalSpectator.com’s Inflation Trend Index (ITI) leaves room for a softer-than-predicted increase. Today’s revised estimates for ITI show that inflation pressure is forecast to hold steady in November and December, albeit at a sharply higher level vs. recent history.

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One side effect of continued inflation concerns is that multi-family real estate investors are hanging on to properties for longer (though a shortage of properties is also at play):

“This is evolutionary,” says [John Brodwin, a senior managing director with management consulting firm FTI Consulting]. “Real estate fund managers have this pile of money that they’re trying to deploy, and it just doesn’t make sense, on a short-term basis, to sell the multifamily assets they already own, given what’s happening with cap rates, inflation and housing demand dynamics.”

Residential Real Estate 🔥🔥🔥

Demand continues outstripping supply in the residential real estate market as well, though Zillow Research says it’s important to put any talk of a recent “boom” in the context of more than a decade of significant undersupply:

More than 1.5 million residential building permits were issued between February 2020 and February 2021 — a benchmark level of housing construction surpassed in every building boom since the 1970s. The problem is that after permit activity bottomed out in 2009 at the depths of the housing crisis, it took more than 11 years to get back to that threshold. The new home construction market today very much remains in catch-up mode, recovering from a decline that was both much steeper and took longer to come out of than in any previous construction cycle.

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Analysis from Quartz also finds that unlike the bubble of 2006-ish, current price growth is driven in large part by undersupply meeting generation-level demand:

“There were probably 6 million houses between 2008 and 2013 that should have been built, but weren’t because millennials weren’t buying. So that brings us to today, where there are millions of homebuyers who can’t find houses because they’re just not out there.”

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Bill McBride at Calculated Risk provides a nuanced look at residential housing prices in the context of other trendlines, like price-to-median income and price-to-rent, to provide useful context around the strong recent headline growth in nominal house prices:

People usually graph nominal house prices, but it is also important to look at prices in real terms (inflation adjusted). As an example, if a house price was $200,000 in January 2000, the price would be over $310,000 today adjusted for inflation (55%). That is why the second graph below is important - this shows “real” prices (adjusted for inflation).

Crypto

Just a few weeks ago, we wrote about how JP Morgan’s price target on Bitcoin was driven in part by increased use of Bitcoin as an inflation hedge. They may well be right in the long term, but as a reminder of just how much volatility remains in Bitcoin (and crypto in general), the price of BTC dropped by nearly $10,000 in a single hour last weekend:

There were signs that there was too much leverage in the market — 100x is not unusual in crypto derivatives, although that’s beginning to change — and a decline over the weekend caused a wave of liquidations, which can turn into a vicious cycle very quickly.

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We’ve also written about how some of the speculative froth around Bitcoin and crypto are masking important underlying technology shifts likely to far outlast any individual cryptocurrency, and one of those technologies is known as a “DAO” or “distributed autonomous organization”. A16Z has published an extensive list of authoritative resources on just what a DAO is and what (and how) it’s used:

Inspired by our NFT Canon earlier this year (and original Crypto Canon), we’ve culled the below list of resources for those seeking to understand, build, and otherwise get involved with these “decentralized autonomous organizations” — which represent the future of community, coordination, work… and much, much more.

Funding Diversity

Echoing trends showing that equity crowdfunding is bringing capital to a much more diverse set of founders than traditional venture capital, Bloomberg reports nine new women-run hedge funds have launched (or are launching soon), including two expected to start with more than $1B under management:

“More investors are recognizing that day-to-day investing is about decision-making, and the science is very clear that more diverse teams make better decisions,” says Rob Manilla, vice president and chief investment officer at the Kresge Foundation, which plans to place a quarter of its U.S. assets under management with diverse managers by 2025. “Why would we think that every good investment idea needs to come from a White male?”

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Speaking of diversity in venture funding, serial entrepreneur Kathryn Finney (who I had the privilege of interviewing a year ago as part of my work with getAbstract) writes in Forbes how forward-thinking emerging VCs are driving strong performance with a more diverse investment approach:

The venture capital industry plays an important role in empowering small businesses—the backbone of America’s economy. The industry makes up a mere 0.2% of GDP, but delivers a stunning 21% of U.S. GDP in the form of revenue backed by venture capital. That said, the practice of leaving founders of color out of the VC equation is being exacerbated in real time, as Black startup entrepreneurs only received 1.2% of the $147 billion invested in American startups during the first half of 2021.

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As another signal that startup investing is getting more inclusive, ratings platform KingsCrowd announced a strategic partnership with Backstage Capital, a VC fund focused on underrepresented founders:

By combining forces, KingsCrowd and Backstage Capital hope to bring more underrepresented investors into the startup space, show them how to become sophisticated angel investors, and drive even more capital to underrepresented founders.