Early reporting data from schools providing endowment performance for the fiscal year ended June 30,2017 suggest that university endowments boosted their investment returns significantly over the last fiscal year from 2016. The median gain for all colleges reporting is 11.3 percent, while the median gain for larger schools (over $500 million in assets) was 13.3 percent for the 12-month period ended June 30th as reported by the Wilshire Trust Comparison Service. Comparatively, the Endowment Index® gained 13.47 percent during the period. Read the full article by Janet Lorin at Bloomberg.com.
Collectively, US unicorns are worth approximately $360B. Combined, these companies have raised just over $73B. To see the full list of US unicorns and associated data, check out the CB Insights blog.
The United States is home to 105 unicorn companies valued at $1B+. As of 7/25/2017, six private US companies are worth over $10B. The two most valuable unicorns in the US are Uber ($68B) and Airbnb ($29.3B). Palantir Technologies and WeWork, both valued at $20B, are tied for third.
Of the top four highest valued, only WeWork (which is based in NYC) is headquartered outside California. California has the highest unicorn “population” of any US state by far, with 62 billion-dollar startups inside its borders. New York ranks second with 15, followed by Massachusetts and Illinois with five each. Eight other states and the District of Columbia are also home to at least one company worth $1B+.
Using the CB Insights database and our real-time global unicorn tracker, we visualized the locations of every US-based unicorn in the map below.
KEY INSIGHTS ABOUT THE COMPANIES IN THIS MAP:
- Collectively, US unicorns are worth approximately $360B.
- Combined, these companies have raised just over $73B.
- After California, New York, Massachusetts, and Illinois, the next-highest unicorn populations are found in Utah (with four) and Florida (with three).
- The top five most well-funded US unicorns are: Uber ($15.1B raised), Airbnb ($4.4B), WeWork ($2.76), Infor ($2.63B), and Lyft ($2.46B).
- The oldest unicorn in the US is the greentech company Bloom Energy, which reached a valuation above $1B in 2009.
- The newest unicorn in the US is 3D printing startup Desktop Metal, which became a unicorn in July 2017 after raising a $115M Series D.
- The three most active investors in US-based unicorns, by total number of deals to these companies, are the VC firms Sequoia Capital, Andreessen Horowitz, and Tiger Global Management.
Learn about our Unicorn Technology Fund by registering here: https://endowmentwm.com/accredited-investor-signup/
Source: CBInsights
Hossein Kazemi, senior adviser to the Chartered Alternative Investment Analyst (CAIA) Association and professor of finance at the Isenberg School of Management at the University of Massachusetts, is claiming that many endowments should skip investments in illiquid assets such as hedge funds and private equity in favor of a multi-asset ETF portfolio.
Kazemi argues that most endowments should not attempt to mimic the Harvard or Yale Endowment portfolio mix by including a vast array of alternative investments, because few of them have the kind of access to top-tier managers that they do, which can lead to “pretty pricey underperformance”.
Kazemi goes on to say that smaller endowments should pursue a specific ETF mix that can provide a more stable return with less of the cost. This mix, according to Kazemi, should provide “similar exposures as a combination liquid/illiquid portfolio, minus many of the expenses associated with illiquid assets”.
In an article from the Wall Street Journal, Justin Lahart describes how the immense growth of Amazon, Apple, Google parent Alphabet, and Facebook has been propelling a substantial portion of the S&P 500’s gains.
The article also touches on how the S&P 500 Growth index has outperformed, while the S&P 500 Value index has under-performed. It goes on to discuss the S&P 500 Equal Weight Index and its inability to outperform the S&P 500, indicating that midsize and small company shares, within the growth and value categories, have been under-performing.
Given the fact that the stock market is currently driven by a small amount of stocks, it could be setting itself up for trouble. According to Lahart, “it might not take much for investors to suddenly pine for all the stocks and styles they have abandoned“.
By Robert L. Riedl, CPA, CFP®, AWMA®
Endowment Wealth Management (“EWM”) is named after our trademarked Endowment Investment Philosophy®, and applies our investment approach, which was pioneered by university endowments seeking to improve their risk-adjusted returns. EWM is a fee-based, Registered Investment Advisor (RIA) that serves as a fiduciary adviser, putting the best interests of our clients first.
We differentiate our firm’s wealth management services from other advisers by combining our unique 3-D Endowment Investment Philosophy® with three layers of unique investment options. Our firm provides our clients access to a combination of low cost passive ETF’s, specialty active satellite managers and illiquid accredited & qualified private equity and debt investment options.
Our goal is to enhance the traditional two-dimensional 60/40 stock-bond portfolio to a three-dimensional allocation by adding a third bucket. This bucket, which it calls “risk-managed” is comprised of real assets, private equity and hedge strategies. That third risk managed allocation grew out of how Yale and Harvard have institutionally managed their university endowments for the past 20 to 30 years.
Our firm’s Endowment Investment Philosophy® is also encapsulated in our Firm’s proprietary Endowment Index® calculated by NASDAQ OMX® (symbol “ENDOW”), a rules-based benchmark based on the asset allocations of over 800 college and university endowments. The Index has garnered national attention from ETF.com, WealthManagement.com and others.
As professionals specializing in family wealth management, we appreciate that our clients trust our professional judgment not just to manage their investments, but to also help sustain the economic future of their most valuable-asset –their family. The word ‘family’ in ‘family wealth’ always comes before wealth. Having a family wealth plan is critical to the whole financial planning process and achieving sustainable multi-generational family wealth, unity and legacy. Only when a family has a comprehensive knowledge of their financial holdings, the worth of those holdings, and the related correlations between all of the holdings, can they effectively implement an investment process leading to sustainable long-term family wealth.
In the 2Q US PE Breakdown report by Pitchbook & Merrill, it examines each phase of the industry’s cycle and investigates the factors most relevant to investors.
Key takeaways in the report:
- PE fundraising through June 2017 has mirrored that of the 2007 boom. Capital commitments are on pace to surpass $220 billion.
- After clocking in at 10.7x in 2016, US M&A EBITDA multiples have regressed slightly in the first half of the year, to 10.5x. Meanwhile, the median debt percentage has increased to 56.3% as high-yield bond spreads reached a three-year low.
- Deal flow held steady in 2Q 2017, though it is still slightly below last year’s pace. Across the US, 886 deals were completed, totaling $153.6 billion in value.
- PE exits continued their slowdown with $102.3 billion in exit value over 474 deals. The industry’s selling rate appears to be entering a new normal following the sale of excess company inventory from the last recession.
Download the full report here: PitchBook_2Q_2017_US_PE_Breakdown
I have been anecdotally using the statistic that: “Nine out of 10 startups fail.” The problem? It’s not true.
Cambridge Associates, a global investment firm based in Boston, tracked the performance of venture investments in 27,259 startups between 1990 and 2010. Its research reveals that the real percentage of venture-backed startups that fail—as defined by companies that provide a 1X return or less to investors—has not risen above 60% since 2001. Even amid the dotcom bust of 2000, the failure rate topped out at 79%.
Read the full article here: http://fortune.com/2017/06/27/startup-advice-data-failure/
According to Justin Lahart of the Wall Street Journal, volatility has seemingly vanished from the stock market, and the simple reason is that economy itself is so calm.
Economic volatility within the U.S. and across the globe is incredibly low, and with this low volatility comes the risk that investors may become far too complacent.
Over the past three years, the standard deviation of the annualized change in U.S. GDP has only been 1.5 percentage points, which is historically about as low has it has ever been. Amazingly enough, global GDP is displaying the same trend.
According to J.P. Morgan economist Joseph Lupton, this lack of volatility not only stems from less shakiness within individual economies, but also because they have become less correlated with one another.
From an investment standpoint, low economic volatility is a good thing, because investors get hit with fewer surprises, however, it can also lure them into complacency and leave them much more vulnerable if volatility were to increase in the future.
This morning the MSCI announced the landmark decision to add 222 China A-share stocks to the MSCI EM Index, all of which are accessible via the Shanghai and Shenzhen – Hong Kong Stock Connect programs. This initial addition will account for 0.73% of the MSCI EM Index and helps pave the way for a substantial inclusion of the A-shares in the Index over the mid to long-term that will force investors to re-evaluate their view and allocation to the world’s second largest economy.
Snapshot of MSCI EM Index:
- Index funds and ETFs have over US$2 trillion bench-marked against the MSCI EM Index with Hong Kong stocks currently accounting for around 26% in the Index.
- If a full inclusion of China’s A-shares were realized then Hong Kong and China combined would account for more than 45% of the Index.
What the A-share inclusion means:
- We expect an initial US$12-14 billion in assets to flow into the MSCI EM Index due to the inclusion.
- Whilst this first inclusion is small, it holds significant relevance as we expect A-shares to increase as a constituent to account for over 18% (or over US$300 billion) of the Index in the next 3-5 years.
- The inclusion will help to institutionalize China’s domestic markets, a move that will be welcomed by the regulators in the retail dominated markets.
- Global institutional investors, including the world’s largest fund houses, have expressed their support for the inclusion and we expect many to re-evaluate their allocation to A-shares, both passive and active.
- The regulators will continue to adjust the QFII, RQFII and Stock Connect programs to allow greater access to the markets and ensure a steady increase to the number of constituents added to the MSCI EM Index.
To summarize, the inclusion is a milestone event that we believe will improve the efficiency and transparency of the China markets whilst forcing investors to re-evaluate their long-term view on the China markets.
Our Endowment Index splits our exposure to Emerging Markets into two: 1) Diversified Emerging Markets allocation using “IEMG” ETF and 2) China A Shares allocation using “ASHR”. Go to www.EndowmentIndex.com to learn more about this Index.