As emerging managers in the tech for impact space, we need to understand what’s next for investors. This week, Marshall and Tatiana attended ALTSLA 2022 to hear from thought leaders funding alternative asset classes including venture capital.
Our key takeaways:
- The markets are pricing in a wider range of possible outcomes.
- Consumer sentiment is dampening due to inflation rising and relative wages decreasing.
- There is $2 Trillion in private market equity ready to deploy. This is a super cycle opportunity for alternative investments to take center stage.
- Given world affairs and current economic conditions, investors are worried about the performance of their investments in “traditional” areas, so alternative investments like venture are getting more interest and larger allocations.
- Several speakers predicted that the 60/40 investment strategy will yield mid-single digit returns in the coming years
- Investors talk about increasing interest in ESG investing, but struggle to define and measure it within their own organizations.
- ESG can be viewed from different perspectives – compliance, risk management, active exclusion of investments in harmful businesses, or engagement in reducing harm.
- It was surprising to us that very few investors seemed ready to shift their gazes forward to see the “social alpha” that can be created by proactively investing in solutions to real-world problems.
- Beware of greenwashing – where investment opportunities use ESG terminology to gain favor with investors but under the covers they are not really aligned with ESG principles at all.
- Some portfolio managers believe that their portfolios should be less liquid and that they are ready to take on more. illiquid long-term bets like venture capital to achieve a higher return.
- The average liquidity premium in private capital is 3.5% in recent years.
- One speaker pointed out that focusing on public market investments misses out on 85% of the opportunities to invest in interesting companies.
- Investment managers work in a profession that has a societal license to operate, and as such, they are a public good and should focus on doing well by doing good for society.
- Investment managers tend to have a “bucketing problem” where they get tied into rigid definitions of what they can/will invest in. This happens due to board mandates and planning processes, but could reject some great opportunities. Allocators were encouraged to communicate with their investors and boards if they plan to invest outside of their mandate.
- There was a lot of interest and curiosity about crypto, despite many of the risks and potential for fraud in the daily headlines.
- In public markets, companies that give up short-term guidance tend to outperform.
- Beware of getting overly enamored by tax plays like opportunity zone projects unless the underlying business proposition makes sense.
Gina Sanchez, Anna Totdahl, Alicia Hanf, Rebecca Brown and Ellen Chen speak at ALTSLA 2022
“ESG Management: Navigating Growing Expectations”