Real Assets Adviser

January 1, 2023: Vol. 10, Number 1

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From the Current Issue

Talking Points: Quotations from people in the news

Matt Houde, co-founder of Quaise Energy, a company seeking to drill deep into the Earth to tap geothermal energy: “The total energy content of the heat stored underground exceeds our annual energy demand as a planet by a factor of a billion. So, tapping into a fraction of that is more than enough to meet our energy needs for the foreseeable future.”

Research Roundup: January 2023

BlackRock Alternatives released 2023 Private Markets Outlook, a report authored by senior investors across private equity, credit, infrastructure and real estate. Download the report here.

Regulation Update: DOL urged to withdraw proposed independent contractor rule

The Financial Services Institute (FSI) submitted a comment letter to the Department of Labor (DOL) regarding the Department’s proposed independent contractor classification rule. As the organization representing independent financial advisers and independent financial services firms, FSI has expressed serious concerns about how the proposed rule would affect independent financial advisers’ independent contractor status and its ultimate impact on advisers’ ability to continue to own and operate their businesses and serve clients within their communities. FSI urges DOL to withdraw the proposal.

Real estate megatrends: A look at five themes driving change in the real estate investment market

It can be easy to get caught up in the trees of day-to-day investment work — capital calls and quarterly results, deal making and committee meetings, the movement of 25 basis points — without pausing to look up and see the forest. But there are deep underlying themes that can affect the investment landscape for years to come and sometimes cause seismic shifts in how real estate is used.

Profile: David Conrod, founder and CEO of FocusPoint Capital Group

Sometimes it pays to believe the best about yourself. David Conrod, founder and CEO of FocusPoint Capital Group, can attest. He started his career in the application software business, and successfully so, until he saw the kind of money some friends were making at Wall Street investment banks. “I thought I was better than they were,” Conrod says — somehow without a hint of accompanying hubris — “so I went to business school, got my MBA.”

After the FTX calamity: Early effort to assess the impact of the cryptocurrency crash

The recent collapse of crypto exchange FTX has sent shockwaves through the defi space, with a potential spillover into traditional finance still possible. It could take months or even years to finally assess the full impact of this collapse. Presently, still more dominoes are likely to fall as de-levering occurs throughout the industry. FTX, its subsidiaries and partners, including Sam Bankman-Fried’s trading firm Alameda Research, are a complex puzzle that will take liquidators years to solve and will almost certainly take out other major players in the defi/crypto space. While uncertainty remains high, three trends will persist as this unfolds.

Targeting the nuts-and-bolts of the metaverse

Many investors are skeptical regarding the “metaverse,” and surely the track record of an earlier introduction to the virtual world, the dot-com bust of 2001, is an unsettling prologue. No doubt, there is hype surrounding latest iterations of the metaverse, just as there are always promoters around any investment scheme in the limelight, from recurrent gold bonanzas to oil strikes to the latest “better battery” tale.

Crude shipping rates could reach a jaw-dropping $200,000 a day in 2023

Over the past 12 months, global container shipping rates have steadily declined to their long-term averages as supply-chain snarls have receded and backups at ports have disappeared. Now, another segment of the cargo shipping industry is seeing day rates explode to record highs.

The future of investing: CB Insights report explores how technology is reshaping wealth and asset management

The past decade has seen digital brokerages, robo-advisers, and micro-investing transform how people manage their money. While these have been important technology developments, they are effectively mainstream at this point. Robinhood launched eight years ago and is now a public company. Every major asset manager now offers a robo-adviser, and apps that allow investments in fractional shares of stocks are a dime a dozen.

Going nuclear on hydrogen: DOE backs pilot project in partnership with four major utilities

How is this for an energy tradeoff: Build a 1,000-megawatt nuclear reactor to produce 150,000 tons of hydrogen per year? That estimate comes from the U.S. Department of Energy, which believes hydrogen could replace natural gas in the nation’s effort to energy emission-free by 2050. In that scenario, hydrogen would be used in fuel cells to produce electricity, as well as to fuel trucks and aircraft. The problem: Producing hydrogen at large scale and low cost has yet to be figured out. Hence the promise of using nuclear power to produce hydrogen in abundance.

Crypto’s last stand

As 2023 concluded, cyptocurrencies were undercut by real-world problems, including the collapse of FTX, the highly touted cryptocurrency exchange, and then a slashing report from the European Central Bank that declared Bitcoin worthless and largely used for illegal transactions.

Gold has the potential to hit $3,000 an ounce in 2023

Will 2023 be the year that gold hits $3,000 an ounce? Ole Hansen, respected commodity strategist at Denmark’s Saxo Bank, says it’s possible once markets realize that global inflation will remain hot despite monetary tightening.

Why won’t energy companies drill? It is the most pressing question facing the U.S. oil market today

Investment pundits and oil analysts all have theories about why U.S. oil companies won’t drill, many of which we believe miss the underlying issues. Several complicated factors have come together to keep the industry from increasing activity. The result is that U.S. shale production growth — the only source of non-OPEC supply growth over the past decade — will likely remain muted for longer than most investors expect.

5 Questions: The technology to promote alternatives

Nobody has ever accused the financial services industry of being overly aggressive in its adoption of new technologies. Just witness how many of today’s investment activities are still consummated with the use of paper and PDF documents and wet signatures. This has been a significant impediment to the broader use of alternatives by investors and their advisers, despite the presence of organizations offering straight-through processing technologies capable of accelerating financial transactions by streamlining data sharing and fully automating the process. Straight-through processing also promises a to eliminate repetitive tasks and reduce the errors.

Notes and Trends: Fidelity forges ahead on crypto

Even as the value of cryptocurrencies has plummeted and the very survival of the digital currencies is being called into question, the space still got a vote of confidence from Fidelity, which launched its new crypto trading accounts for retail investors. The only cryptocurrencies available to trade on the Fidelity Crypto platform as of now are bitcoin and Ethereum, but Fidelity says “additional cryptocurrencies are being evaluated to expand trading opportunities over time.” Fidelity Crypto is available in 35 U.S. states at present. (Kitco)

Tax Update: Tax-loss harvesting strategies to boost a portfolio’s growth

2022 has been a challenging year for investors. With a shifting macro environment, partly led by the Fed’s aggressive rate hikes intended to bring down inflation, pain has been felt across markets. Through Aug. 31, the S&P returned roughly –16 percent on the year, marking the worst start in nearly 50 years.

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