Family Office & RIA Weekly Roundup | 8.24.23 | Volume 69

Family Office & RIA Weekly Roundup?

Volume 69

08/24/2023 (4 Min. Read)

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AI-Powered ETFs Lag, Troubled Office Loans Pose Issues for U.S. Economy and U.S. Savings Dwindle in this Week's Edition...

Take a Lap Around the Industry

• Ralph Schlosstein of Evercore Predicts the End of the 'Golden Age' for Investing?(Bloomberg)
• Near-Record Low Housing Supply Contributes to July Home Sales Decline?(CNBC)
• UBS Set to Retain Credit Suisse's Local Banking Arm, Considers Brand Change?(Bloomberg)
• Challenges Mount for Ryan Tolkin as Returns Dwindle at $13 Billion Hedge Fund?(Insider)

Bullish Tech Stocks Highlight Disparity in AI Fund Performance

The allure of integrating artificial intelligence into the realm of finance has ignited considerable interest, however, the performance history of AI-powered portfolio managers falls short of expectations. In an intriguing convergence of technology and investment, around 13 (ETFs) have entrusted AI applications with the task of managing their portfolios. Curiously, these ventures have largely missed out on the market surge driven by the tech sector this year, lagging behind benchmark indexes such as the S&P 500. This apparent irony spotlights the juxtaposition between investor enthusiasm for AI and its practical limitations within the fiercely competitive world of stock selection. One striking case in point is the WisdomTree U.S. AI Enhanced Value Fund (AIVL), commanding an impressive $385M in assets. However, the fund's total return of 2.2% this year pales in comparison to an ETF tracking the Russell 1000 Value index, which has gained 4.5%. This shortfall in performance is attributed in part to the AI's reluctance to invest in Meta Platforms, a pivotal player in the AI landscape. The contrasting outcomes of AI-powered ETFs and the broader market rally underscore the complexities of employing AI in investment strategies, an intersection of promise and pragmatic challenges.

"I think mistakes are going to be made early on, and I don’t really want to be part of those mistakes..."

Jack Butler

Private Funding Pulse Check

• Env0, a company assisting in the deployment and management of Infrastructure as Code (IaC), has recently closed their $23.8M Series A funding round, with the participation of Knollwood Investments
• Silvio Berlusconi's Family Office, H14, has invested in a $12M Venture funding round in?Qualifyze, a platform securely facilitating the exchange of data in order to make supply chains more transparent and secure
• In a recent Series C round, Willett Advisors participated in an investment totaling $255M in?Cellares, a company revolutionizing cell therapy manufacturing
• Breyer Capital has joined a $60M Series B investment round in?Elemental Cognition, a New York, NY-based platform providing a revolutionary Generative AI with superior natural language understanding

https://www.fintrx.com/

$1.2 Trillion Landlord Debt Sparks Growing Concerns of Defaults

Amidst a shifting landscape in the U.S. commercial real estate sector, Newmark Group Inc. has sounded the alarms, revealing that around $1.2 trillion in debt is now deemed "potentially troubled" due to the combination of high leverage and declining property values. With a notable focus on offices, where values have plunged by 31% since the Federal Reserve's interest rate hikes began in March 2022, concerns are rife that the $626B of at-risk debt set to mature by the end of 2025 could trigger a surge in defaults. This unsettling scenario is exacerbated by rising costs for landlords seeking to refinance in a higher interest-rate environment. Already, prominent names like Blackstone Inc., Brookfield Corp., and Goldman Sachs Group Inc. have experienced defaults or property relinquishments to lenders this year. As David Bitner, Newmark's global head of research, underscores, the incentive for overleveraged owners to return properties to lenders is increasingly compelling. The upcoming reckoning in the sector prompts contemplation of whether delaying action will lead to greater regrets down the line.

"They’re going to have every incentive to hand back the keys to lenders...I’m shocked that hasn’t happened a lot more."

David Bitner, Newmark

Pandemic Savings Dwindle: A Looming Economic Challenge?

During the pandemic, U.S. households accumulated a significant excess savings buffer, largely bolstered by the government's fiscal support. However, this cushion is rapidly depleting. According to the Federal Reserve Bank of San Francisco, Americans might exhaust these pandemic savings by the end of the third quarter of 2023. The term "excess savings" denotes the disparity between actual savings and the pre-recession trend. By June, these savings had dwindled to less than $190B. Furthermore, the Bureau of Economic Analysis adjusted its figures, revealing that household disposable income was lower and consumption higher than initially reported, reducing the aggregate personal savings by over $50B. While strong consumer spending has been a boon for the economy, preventing a potential recession, the diminishing savings could be a concern. This trend is evident as Americans increasingly rely on credit cards, accumulating nearly $1 trillion in debt, as per Fed data.

"There is considerable uncertainty in the outlook, but we estimate that these excess savings are likely to be depleted during the third quarter of 2023."

Hamza Abdelrahman & Luiz Oliveira, San Francisco Fed

Wellness Startup Gympass Secures Additional Funding, Valuation Surges to $2.4B

Gympass, the prominent corporate wellness platform, has secured $85M in a Series F funding round, valuing the company at $2.4B, according to a recent announcement. Gympass achieved an impressive 80% growth in its customer base, serving over 15,000 corporate clients, and exceeded two million employee subscribers through its extensive network of 50,000 partners. In a time when organizations are increasingly acknowledging the significance of employee well-being for retention, happiness, productivity, and healthcare cost reduction, Gympass stands out with its unique approach. Their research indicates that incorporating wellness programs can lead to a 35% decrease in company healthcare expenses over twelve months due to physically active employees. This strategic funding round reflects the endorsement of Gympass' distinctive model, which focuses on proactive and holistic wellness benefits to address growing healthcare costs and enhance employee welfare and effectiveness. Gympass' expansion across 11 global markets is supported by its resilient recurring model that harnesses network effects as it scales, creating wider access to wellness activities. Prior family office investors in Gympass include Provence Capital and Moore Ventures.

"Gympass is revolutionizing corporate wellness at a time where every company is making investments to drive efficient growth and reduce spending."

Cesar Carvalho, Gympass

https://www.wsj.com/finance/wellness-startup-gympass-bulks-up-with-new-funding-at-2-4-billion-valuation-c4c8afe?mod=finance_lead_pos5

Rep Roundup: Navigating Advisor Shifts ??

• Financial Advisor Burdette Park, who oversaw approximately $300M in client assets at Merrill Lynch, has joined Raymond James & Associates
• Burdette Park, along with his colleague Heather Jones, will establish their presence under the Raymond James umbrella
• The duo will concentrate on serving a varied clientele, including business owners, executives, individuals planning for retirement, and corporate retirement plans
• Park's decision to transition to Raymond James was motivated by the company's strong culture, dedication to client-centered practices, advanced technology, and stability?(InvestmentNews)