Family Office & RIA Weekly Roundup | 3.21.24 | Volume 96

Volume 96

03/21/2024 (5 Min. Read)

?

Global Family Office Count Triples, AI Drives Indices to All-Time Highs and PE Comes to the Rescue of Regional Banks in this Week's Edition...

Take a Lap Around the Industry

• Venture Capital Funding for African Startups Declines by 31% (Bloomberg)
• Against the Backdrop of AI Fatigue, Nvidia Primarily Battles Its Own Shadows (WSJ)
• Intel Secures Up to $8.5B in Grants Under CHIPS Act, Additional Loans on the Horizon (CNBC)
• Anticipated FOMC Meeting: Economists Forecast Three Interest Rate Cuts in 2024 (Bloomberg)

Family Offices Triple, Shifting the Dynamics of Wealth Management

The dramatic tripling of family offices since 2019 has sparked a modern gold rush on Wall Street, with heavyweight investment firms like Blackstone, KKR, and Carlyle hustling to cater to the?wealth of the world's ultra-rich. According to a new report, over 4,500 family offices now operate globally, predominantly in North America, collectively managing assets exceeding $6 trillion. This surge reflects a broader demographic shift as the ranks of billionaires and centi-millionaires expand, signaling vast untapped potentials for private equity, hedge funds, and venture capital sectors. Amidst this investment landscape evolution, family offices are transitioning from traditional asset classes to seeking more lucrative returns in alternatives, with mixed success in recent years. This pivot towards alternative investments underlines the strategic shifts on Wall Street as it adapts to the increasingly sophisticated demands of ultra-high-net-worth families, setting the stage for a reshaped financial future.

"Private equity firms are going after the family office market aggressively. Blackstone, which has served wealthy individuals for decades through its Private Wealth Solutions business, is ramping up its Private Capital Group, which serves family offices, billionaires and the largest, most sophisticated individual investors. That team has doubled to 25 people over the past few years and is likely to keep growing..."

Craig Russell, Blackstone

Private Funding Pulse Check?

• Securing $150M in Series A funding, Clasp Therapeutics, a company aiming to bring absolute precision to immuno-oncology, has received backing from Geneva-based Pictet Family Office
• Premji Invest recently took part in a Series A funding round, investing $53M in Hippocratic AI, a company developing a safety-focused large language model (LLM) for the healthcare industry
• TheyDo, a company developing a platform to map customer experiences, has successfully closed a $34M Series B funding round, with participation by the Jacobson Family's Highsage Ventures
• A semiconductor company aimed at developing ultra-low-power high-performance circuits, E-Peas, has attracted a $19M Venture investment from Otium Capital

https://www.fintrx.com/

Rep Activity Tracker ??

• Caprock has announced the acquisition of Grey Street Capital, adding $2.2B in client assets
• Grey Street Capital will integrate and operate under the Caprock brand, enhancing service capabilities for ultra-high-net-worth clients with aligned expertise and shared values
• Jay Page, co-founder of Grey Street Capital, emphasizes the significance of the acquisition, highlighting access to an expanded toolset and a shared client-first approach to wealth management
• The acquisition marks Caprock's first strategic move, reflecting its dedication to driving growth while preserving the integrity of its bespoke services, setting a high standard for future partnerships (PR Newswire)

AI Drives S&P 500 to Record Highs: A New Era of Market Optimism

In the midst of the AI revolution sweeping through the market, stocks are soaring to new heights. The S&P 500 has surged to unprecedented levels since the start of the year, showcasing a strong belief from investors. This rally, driven by a group dubbed the "Magnificent 7," primarily consists of tech behemoths, has pushed market concentration levels to their peak. However, this trend isn't merely speculative; it's underpinned by substantial earnings and grounded valuations. Historical data from 1970 reinforces the potential for gains, showing that investments at peak levels yield comparable returns to those made at any market position, with an average uptick of 9.4% a year later. As the AI-fueled enthusiasm continues to bolster the tech sector, analysts also foresee other industries like healthcare and consumer goods gaining momentum, suggesting a broader market upswing.

"The shift to higher rates reconfigured the investment landscape in a way that requires careful contemplation of a set of possibilities, trade-offs and risks that were largely dormant over the previous decade."

Elyse Ausenbaugh, J.P. Morgan

Private Equity Ventures into Banking Amid Regional Turmoil

In the wake of recent disturbances within the regional banking sector, private equity firms have emerged as unlikely saviors, stepping in with significant investments to bolster ailing institutions. This pivot marks a notable shift for a sector traditionally viewed with caution by private equity, due to stringent regulatory limitations and the complex nature of banking operations. The failure of Silicon Valley Bank set the stage for this unusual collaboration, presenting a unique opportunity for private equity to engage in a realm where they have historically been spectators. Firms such as Liberty Strategic Capital and Reverence Capital Partners have led rescue efforts, injecting over $1B into New York Community Bank alone. Despite the challenges, including federal restrictions on ownership stakes and the high technical and regulatory demands of banking, these investments reflect a strategic gamble that distressed banks can offer valuable returns. This approach, while cautious, signals a broader interest in the potential for recovery and growth within the banking sector, even as it navigates through turbulent waters.

"Most people stay away from the [banking] sector because they haven’t lived through the cycles, they don’t have the regulatory or sector expertise, and they don’t know how to achieve what they want..."

Milton Berlinski, Reverence

Tony James' New Venture Madison River Capital Seeks $400M for Debut Fund

In the ever-evolving landscape of private equity, Tony James, a Blackstone Inc. billionaire, is redirecting his investment prowess through Madison River Capital, a new venture emerging from his family office. With an ambitious goal to secure $400M for its inaugural fund, Madison River Capital is already halfway there, showcasing the magnetic appeal of its investment strategy among the world’s elite investors and institutional financiers. The firm, leveraging the expertise of its team previously integral to James' investment activities, aims to carve out a significant niche within the sectors of health care, industrials, and business services. This initiative marks a strategic shift for James, reflecting a broader trend of private equity veterans establishing independent paths while leveraging their legacy and networks. Madison River Capital's debut shines a light on the energy in private equity, showing off a combination of old-school skills and fresh investment tactics aimed at making long-term gains.

"The move highlights a major change in how the septuagenarian manages one of Wall Street’s biggest fortunes. James previously oversaw his private equity investments through his New York-based family office, Jefferson River Capital, where Madison River Capital managing partner David Wittels served as president before launching the spinoff in early 2022. The same year, James stepped back from Blackstone after spending almost two decades at the company."

Benjamin Stupples, Bloomberg

https://www.bloomberg.com/news/articles/2024-03-19/blackstone-billionaire-tony-james-family-office-spawns-new-firm?sref=l3FEFSDd