Skip to main content
Yale's $41.4 billion endowment (as of June 30, 2024) Source: Yale.edu
Jan 28
Love0

Size of Global Real Estate

By Alternative Investments

The total value of all developed real estate on the globe reached US$217 trillion in 2015, according to calculations by international real estate adviser, Savills. The analysis, published today for the first time, measures the entire developed property universe including commercial and residential property as well as forestry and agricultural land.

The value of global property in 2015 amounted to 2.7 times the world’s GDP, making up roughly 60% of mainstream global assets and representing an important store of national, corporate and individual wealth. Residential property accounted for 75% of the total value of global property.

Overall, the biggest and most important component of global real estate value is the homes that people live in, totalling US$162 trillion. The sector has the largest spread of ownership with approximately 2.5 billion households and is most closely tied with the fortunes of ordinary people. Residential real estate value is broadly distributed in line with the size of affluent populations: China accounts for nearly a quarter of the total value, containing nearly a fifth of the world’s population. Yet the weight of value lies with the West, over a fifth (21%) of the world’s total residential asset value is in North America despite the fact that only 5 per cent of the population lives there.

The trend for western nations to dominate real estate is most pronounced in commercial markets, where nearly half of the total asset value resides in North America. Europe makes up over a quarter while Asia and Australasia contain 22 per cent, leaving just 5 per cent for South America, the Middle East and Africa.

Not included in the global calculation is the value of informal neighbourhood commercial properties: workshops, workspaces, shops and small business premises which are not part of the high quality commercial real estate universe that constitutes global property markets, but which are important components of economic growth and prosperity, especially in emerging markets.  They are almost impossible to value at a global level but have huge potential for future investment as economies mature and real estate markets develop within them, adding to the global stock.

This year, for the first time, the value of agricultural land and forestry is also included in the Savills measurement of total world real estate at an estimated US$26 trillion, of which around 30% is corporately and institutionally invested. Most agricultural and forestry land is owned by non-investing entities, operators and occupiers, especially in emerging economies where this is a sector with great potential for further growth and investment.

Global real estate universe in comparison Table: globalrealestatecomparison

Breakdown of developed global real estate’s total value Table:  breakdowndevelopedrealestate

(Source: www.savills.com)

Jan 27
Love0

Alternative Investments AUM

By Alternative Investments

Money management tracker Preqin reported that total assets held by alternative investment managers reached $7.4 trillion globally in 2015, up 10.1% from the prior year, according to Pensions & Investments. Hedge fund industry assets rose 6.7% to $3.2 trillion in the first eleven months of 2015. Hedge funds reported net inflows totaling $71.5 billion in the first six months of 2015, but experienced net outflows totaling $4.8 billion for the five-month period ended November 2015. 

(Source: Prequin)

Oct 30
Love0

SEC Adopts Rules to Permit Crowdfunding

By News

Here comes crowd funding for the masses…the ultimate democratization of an institutional asset class viz. venture capital…

http://www.sec.gov/news/pressrelease/2015-249.html?utm_source=Title+III+SEC+Ruling+&utm_campaign=Title+III+Ruling&utm_medium=email

Oct 30
Love0

November is National Family Caregivers Month- Time to Plan for Long-Term Care

By Retirement

November is National Family Caregivers Month. Caregiving often involves providing for the needs of our older family members, friends, and neighbors. As the number of older Americans rises, so will the number of caregivers. While we take this time to recognize our caregivers, it’s also a good time to consider planning for long-term care. According to the U.S. Department of Health and Human Services, almost 70% of people over age 65 will need some type of long-term care during their lifetimes. Between the ages of 40 and 50, on average, 8% of people have a disability that could require long-term care services. The average yearly cost for long-term care in a nursing home is about $74,820 for a semiprivate room, while the average annual cost for care in an assisted-living facility is $39,516.

Now is a great time to get educated on the significance of long-term caregiving in general and the importance of planning for long-term care within your overall financial plan.
5 Questions about Long Term Care

Oct 16
Love0

Prateek Mehrotra Featured In Trusted Insight Cover Article

By General, News

Prateek Mehrotra, MBA, CFA®, CAIA®, Chief Investment Officer of Endowment Wealth Management, and its affiliate, ETF Model Solutions, is featured in an exclusive cover interview in the most recent issue of Trusted Insight Magazine. In the article, Prateek discusses his career path, along with the vision that lead to his co-founding of the two firms’ of which he serves as Chief Investment Officer, serving clients through a multi-family service model, and the firms’ investment approach.  You can read the article at Trusted Insight website (requires free registration to access).

Oct 16
Love0

U.S. Inflation Watch Sep-2015

By Inflation Watch

The Labor Dept. reported that headline inflation fell 0.2% in September from August and was flat or zero on a year over year basis. However, the core CPI which excludes volatile food and energy was up 0.2% over the previous month and increased 1.9% year over year, marking its biggest gain in a year.

Majority of the gain in the core CPI was driven by shelter costs which increased 3.2%. However, the inflation measure preferred by the Federal Reserve, core PCE has a 20% weighting to shelter costs vs. the core CPI which has 40%. Estimates are that the core PCE increased just 1.3% year over year, which is below the Fed’s 2% comfort level.

While inflation is not a worry yet, improving labor markets and wages could subsequently add more fuel to fire in the future. Something we are keeping an eye on.

(Source: WSJ, BLS)

Sep 21
Love0

U.S. Household Net Worth Climbs to the highest level in 2Q-2015

By Uncategorized

The wealth of American households climbed to a new peak in the second quarter, bolstered by rising real-estate values that more than compensated for a flat stock market.

The net worth of U.S. households and nonprofit organizations—the value of homes, stocks, bonds and other assets minus all mortgages, debts and other liabilities—climbed by $695 billion to $85.7 trillion, according to a Federal Reserve report released Friday.

The report provides a snapshot of the robustness of American balance sheets before the turmoil that struck stock markets in August. Households lost close to $13 trillion in the recession, but a soaring stock market and resurgent home prices have boosted American wealth by $30 trillion over the past five years—gains fueled in part by a campaign of ultra-low interest rates and large-scale asset purchases by the Fed.

US Networth 2nd Quarter 2015

Sep 18
Love0

Fed leaves Rates Unchanged

By News

This week saw one of the more widely anticipated Fed announcements of recent years as investors looked to see if the “zero” interest rate environment was going to be put behind us.  As was widely publicized yesterday, the Fed elected to do nothing, based upon concerns of an economic slowdown, pushing off the prospect of a rate hike.   First Trust’s economic team put out a report that provides the text of the Fed’s statement, along with their perspective of what we can expect moving forward.  Learn more.

Sep 02
Love0

Comparison of August 2015 to 1997, 1998 and 2011

By Uncategorized

The difficult market environment in August reminded us about the three other Augusts – August 1997 (Asian crisis), August 1998 (Russian crisis) and August 2011 (European debt crisis). In each of those episodes, there were some type of global risk events, and as a result, US market suffered significantly.

In 1997, Asian financial crisis started in Thailand with the collapse of the Thai baht after the Thai government was forced to cut the Thai baht’s peg to US dollar after exhausting its foreign reserve. As the crisis spread to Indonesia, South Korea and Malaysia, most of Southeast Asia and Japan experienced declining currencies, stock markets crashes and a jump in private debt. The crisis raised the fears of global economic meltdown. As a result, the US equity market dropped by 5.6% in August. However, the US market recovered quickly with a 5.5% rally in September.

In 1998, the Asian financial crisis and the following reduced demand for crude oil and nonferrous metals, negatively impacted the Russian exports and foreign reserves. A series of political missteps and inability to implement a set of economic reforms severely erased investor confidence and led to capital flight. Without enough foreign reserve to support its currency, on 17 August 1998, the Russian government devalued the ruble and defaulted on domestic debt. The Russian default caused global liquidity dry up and credit spreads widen, which brought down the then-known hedge fund, Long Term Capital Management. US equity markets tumbled 14.4% in August, but again recovered nicely in September and October.

In 2011, the European debt crisis intensified after it started in the wake of the Great Recession around late 2009. In August, the government bond yields in Italy and Spain breached 6% level as the European leaders struggled to reach an agreement to expand the bailout fund. The US equity market dropped by 12.4% during the months of August and September. However, once again, it recovered in October, gaining 10.9%.
This year, the stock market rout started in China when the Chinese government unexpectedly devalued its currency, which triggered concerns over global economic slowdown. The US equity market declined by 6.1%.

Event S&P 500 Index

(August)

 S&P 500 Index

(whole year)

 Valuation (current PE) Short Term Interest Rate ISM Manufacturing Index
1997 -Asian Crisis -5.6% 33.4% 21.9 5.2% 56.3
1998 – Russian Crisis -14.4% 28.6% 22.0 4.8% 49.3
2011- European Debt crisis -12.4% (Aug and Sept) 2.1% 13.6 0.0% 50.6
2015 – Chinese Slowdown -6.1% ?? 18.6 0.0%

 

 51.1

The equity market drops in the first three crises all recovered nicely and quickly. Will this time be the same? We believe it is quite likely though we still recommend caution.

  1. There is no crisis this time so far. The Chinese economy will definitely or has already slowed down from double digit to 7% or lower. But everyone tends to agree that it will grow at a reasonable pace. The Chinese stock market rout started after a dramatic run-up and a bubble-level valuation. The sell-off, though painful, was a necessary correction. As a word of caution, the bad news from China may not be over, we may  see more market volatility going forward.
  2. The US equity valuation is not cheap, but not at an extreme (see table above). During the crises in 1997 and 1998, the equities are much more expensive.
  3. The US monetary policy is ultra-loose. Even if the Fed may raise interest rates this year, the monetary policy is still very accommodative. The interest rates in 1997 and 1998 were much higher.
  4. The US economy is solid. In Q2, the US economy grew at 3.7% annual pace. ISM Manufacturing Index is still in expansion territory and unemployment rate is close to 5%. The slowdown in China will have limited impact on the US growth as the exports to China only account for 1% of the GDP in the US. However, the slowdown in China will have significant impacts on the US companies that are doing businesses there.

(Source: Julex Capital)