Our fly on the wall reports…
There was a buzz in the air at aperture’s recent events in Geneva (Restautant Le Baroque) and Zurich (Hotel Widder). We brought investors, fund managers, founders and fintech industry experts together for some lively discussion on alternative assets.
If you’d been a fly on the wall, you’d have picked up useful tips on kombucha and mountain biking and also some valuable insights into the outlook for alternatives in 2024:
1. The 0% party is over but the hangover is already clearing. Markets are adjusting to a new normal, with higher interest rates, deglobalisation and greater economic uncertainty. However, as Teena Jilka of Mercer pointed out, savvy investors love uncertainty. What’s more, the megatrends in climate and technology haven’t gone away. Andreas Iten of Tenity sees the correction in alternative asset valuations as positive in some ways – there will be opportunities in 2024, but they won’t be overhyped.
2. Opportunities won’t be in the obvious places: Julien de Mayer of Fundcraft believes not in particular industries or sectors but in “entrepreneurs who find a problem and tackle it”. Teena Jilka agrees that investors need to be highly selective and that this is the time for active managers to prove their worth. Private credit could be a particularly interesting way to access opportunities. As Zsolt Kohalmi of Pictet Alternative Advisers pointed out, there may be specific regions and sectors – like US real estate – where companies need to refinance but the senior banks no longer want to get involved.
3. Real-estate will be re-energised: 2023 was a “Category 5 Hurricane” for real estate according to Kohalmi, who is also Global Head of Real Estate at Pictet. While other major asset classes are near their all-time highs, real estate is close to cyclical lows. However, there are many nuances in this market – from green buildings to energy prices to office occupancy rates – and big regional variations in supply and demand. So, as we’ve already touched on, it makes sense to be selective.
4. Every VC will be a climate VC. The past decade has seen private equity and venture capital treading heavily on each other’s toes, with PE firms chasing tech opportunities and VCs getting involved in the applications of tech across multiple sectors that weren’t its core expertise. However, Nicolas Colin, Co-Founder of The Family, expects to see VCs going back to their roots in 2024, backing cutting-edge technology, taking bets on the future and focusing especially on climate. Michael Sidgmore of Broadhaven Ventures went a step further, predicting that – given the trillions of dollars that need to be allocated and the multiple technologies involved – every VC would inevitably become a climate VC.
5. This is the year that alternatives finally go mainstream. Or is it? Few disagree that HNW and retail investors will be the next wave of growth in alternative assets, but the jury is still out on timing. Michael Sidgmore was optimistic about the wealth channel, noting that big firms are already positioning themselves and investing heavily in education. Regulatory frameworks like ELTIF 2.0 are also in place, so what’s missing? According to Julien de Mayer of Fundcraft, it’s the plumbing, i.e. the infrastructure to handle the huge amount of extra admin involved. Digital providers like Fundcraft now exist, but they still need to be widely adopted.
6. AI may be more evolutionary than revolutionary. A lot of venture capital is pouring into AI startups, but these might not be the best bets. Why? According to Nicolas, AI is more of a “sustaining” than “disruptive” technology, likely to lead to productivity gains than transforming whole industries. Moreover, he says, the benefits are more likely to flow to incumbents – with scaled infrastructure and distribution and access to the largest datasets for training – than to startups.
7. European fintech is still interesting, because it’s still so necessary. That was the view of Nicolas Colin, and it’s widely shared. The fragmentation and inefficiencies of European capital markets have already created many opportunities for investors but the problems are far from solved. As we’ve discussed, the alternative asset industry is itself held back by inefficiencies and outdated infrastructure. So, in 2024, we fully expect to see the industry investing to solve its own problems and drive its next phase of growth.
8. 2024 is the year asset owners get realistic about asset prices. According to Magnus Grufman, more M&A and funding activity should be happening, but asset owners haven’t yet wanted to mark down the value of their assets. He predicts this will change in 2024 and we’ll see a return of dealmaking. Nicolas Colin echoes this sentiment and predicts some of the best returns investing in companies than should never have taken VC funding and which can steered quickly to profitability.
9. Excel is dead. You heard it here first. Even in a room of digital die-hards, this prediction from Julien de Mayer caused a few gasps. Perhaps don’t hold your breath for a final farewell in 2024, but the reality is that the alternative sector needs a massive shake up of its back-end infrastructure. As Max Derpa of Tenity put it, we need highly efficient digital native administrators to make VCs and other alternative assets and more accessible.
Thank you to all of the guests and panelists who contributed to the discussion and debate at our recent events. You can find some of their personal reflections and expectations for 2024 here:
Groundhog Day for ELTIF 2.0, by Julien De Mayer
2024: The year of traditional alternative assets, by Michael Sidgmore
Conditions are building for a real-estate revival – for the right properties, by Zsolt Kohalmi
Digital administration will ease fund management pain, by Maximilian Derpa
Savvy investors will clean up now the 0% party is over, by Teena Jilka
The Year Ahead for Alternative Assets, by Nicolas Colin
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