23095052321715661284394680

  Stone Mountain Capital - Alternative Investment Advisory
  • About
    • Partners
    • Ventures
  • Team
    • Oliver Fochler
    • Ashvin Chotai
    • Pascal Hasler
    • Alexander Rothlin
    • Claudio Calonder
    • Joaquin Abos
    • Alliances
  • Advisory
    • Corporate Finance
    • Solutions
    • Mandates
  • Research
    • Perspective Subscription
    • News
    • Awards
  • Contact
    • Privacy Policy
    • Anti-Bribery Policy
    • UK Stewardship Code
    • ESG Policy
    • Disclaimer
  • Login

alternative markets outlook 2021

22/2/2021

 
Picture
Alternative Markets Outlook 2021
The year 2020 was dominated by Covid-19 and this is likely to continue in 2021, hopefully to a lesser degree with the vaccination programs running. Two major impacts, which can affect 2021 substantially are the effectiveness of the vaccination against certain mutations of the virus that emerge more and more. While Pfizer/ BioNTech stated that their vaccine is likely to effectively protect against the UK mutation, J&J said that their trial results do not effectively protect against the South African and Brazilian variant. The second major aspect around Covid-19 in 2021 addresses the production quantity of the vaccines and when a critical mass of immunization in countries is reached. The fight from central banks against the economic damage caused by Covid-19 is likely to continue, although not nearly with the same numbers as in 2020. Interest rates are likely to remain close to zero with a tendency of higher interest rates with a long-time horizon. Despite the great performance of gold in 2020, it underperformed since reaching its peak in August 2020, mostly remaining at the $1,850 per ounce level and in 2021 so far, it dropped below $1,700, despite frequent projections for gold of around $2,500 up to $3,000 per ounce in 2021. It remains to be seen whether gold can reach this level. Gold has seen a lot of inflows during 2020, in particular in ETFs, but has also faced redemptions for reallocation towards well-performing equities and its digital alternative Bitcoin (BTC). Another important factor for gold is whether the anticipated inflation emerges or not. Another seemingly unhealthy development is the deviation from stock prices and the real results of the economy. This development can be explained partly by the tremendous money printing in 2020, as this cash needs to be deployed somewhere and bonds with zero percent interest are no alternative anymore.
​Hedge Funds
The last two years were exceptional for hedge funds. In 2019, hedge funds achieved a return of 9%, the best return in the decade back then. 2020 was even better with an average return of approximately 17%. Figure 1 shows the returns over the last three years of the flagship funds of the top-earning managers. Across all years, there were huge deviations in their yearly performance results. In 2019, the returns fluctuated between 10% up to 60% returns. In 2020, the returns shifted in an ever more positive direction, as the lowest return was 14%, whereas the highest achieved return is 76%. In comparison, the average of our strategies returned 68% this year and Figure 2 shows a distribution of returns of our strategies. 2019 and in particular 2020 has helped the industry to be in demand again, after rough years before, as hedge funds managed to reduce the downside risks of the Covid-19 crisis but also performed well in the bull run after the initial dip. Due to the increased demand on hedge funds that emerged in 2020, it is likely that the AuM of the industry will increase quite substantially in 2021, especially if equity markets should continue to perform as well as they are doing currently. This would boost the AuM of the industry both by net inflows and by the intrinsic growth through performance of funds. The institutional demand is driven mostly by the performance in 2020 and the expected market volatility in 2021.
Picture
Picture
*|MC_PREVIEW_TEXT|*
RESEARCH PERSPECTIVE VOL. 149
February 2021
Alternative Markets Outlook 2021
The year 2020 was dominated by Covid-19 and this is likely to continue in 2021, hopefully to a lesser degree with the vaccination programs running. Two major impacts, which can affect 2021 substantially are the effectiveness of the vaccination against certain mutations of the virus that emerge more and more. While Pfizer/ BioNTech stated that their vaccine is likely to effectively protect against the UK mutation, J&J said that their trial results do not effectively protect against the South African and Brazilian variant. The second major aspect around Covid-19 in 2021 addresses the production quantity of the vaccines and when a critical mass of immunization in countries is reached. The fight from central banks against the economic damage caused by Covid-19 is likely to continue, although not nearly with the same numbers as in 2020. Interest rates are likely to remain close to zero with a tendency of higher interest rates with a long-time horizon. Despite the great performance of gold in 2020, it underperformed since reaching its peak in August 2020, mostly remaining at the $1,850 per ounce level and in 2021 so far, it dropped below $1,700, despite frequent projections for gold of around $2,500 up to $3,000 per ounce in 2021. It remains to be seen whether gold can reach this level. Gold has seen a lot of inflows during 2020, in particular in ETFs, but has also faced redemptions for reallocation towards well-performing equities and its digital alternative Bitcoin (BTC). Another important factor for gold is whether the anticipated inflation emerges or not. Another seemingly unhealthy development is the deviation from stock prices and the real results of the economy. This development can be explained partly by the tremendous money printing in 2020, as this cash needs to be deployed somewhere and bonds with zero percent interest are no alternative anymore.
 
Hedge Funds
The last two years were exceptional for hedge funds. In 2019, hedge funds achieved a return of 9%, the best return in the decade back then. 2020 was even better with an average return of approximately 17%. Figure 1 shows the returns over the last three years of the flagship funds of the top-earning managers. Across all years, there were huge deviations in their yearly performance results. In 2019, the returns fluctuated between 10% up to 60% returns. In 2020, the returns shifted in an ever more positive direction, as the lowest return was 14%, whereas the highest achieved return is 76%. In comparison, the average of our strategies returned 68% this year and Figure 2 shows a distribution of returns of our strategies. 2019 and in particular 2020 has helped the industry to be in demand again, after rough years before, as hedge funds managed to reduce the downside risks of the Covid-19 crisis but also performed well in the bull run after the initial dip. Due to the increased demand on hedge funds that emerged in 2020, it is likely that the AuM of the industry will increase quite substantially in 2021, especially if equity markets should continue to perform as well as they are doing currently. This would boost the AuM of the industry both by net inflows and by the intrinsic growth through performance of funds. The institutional demand is driven mostly by the performance in 2020 and the expected market volatility in 2021.
Figure 1: Returns of Flagship Funds by Top-Earning Managers from 2018 to 2020, Source: Bloomberg, February 2021
Figure 2: Distribution of Returns of SMC’s Hedge Funds Strategies, Source: Stone Mountain Capital Research, February 2021
Cryptocurrencies / Blockchain
Cryptocurrencies did extremely well in 2020 with Bitcoin (BTC) being up around 400% and Ethereum (ETH) around 700% from their respective March 2020 lows. Nevertheless, this extreme price spike that started in December 2020 has not slowed down in the slightest. BTC is already trading at around $56k and ETH crossed the $2k mark for the first time on 20th February 2021. BTC’s price development in 2021 is shown in Figure 3. It started the year at $29k and has already almost doubled in less than two months. Its market capitalization now exceeds $1tn. Figure 4 shows a comparison of the market capitalization of BTC and ETH to the market cap of the largest banks. Despite being a few days old, the Figure seems already outdated, as the market cap of BTC is currently $1.05tn and ETH is at $226bn. The outlook of cryptocurrencies in 2021 is very uncertain, although it is highly expected that BTC will reach the $100k mark, as suggested by its halvening pricing method of the stock-to-flow model shown in Figure 5. BTC in particular has attracted huge inflows from wealthy individuals and institutional investors around the globe and is now mostly seen as valid asset class. Furthermore, companies are making moves to buy BTC as well, as Tesla did and causing a $5k price spike within minutes. In spite of these developments, such a rapid growth is certainly unhealthy, and the entire development needs to be viewed with caution. Although if a crash occurs, it is unlikely that the damage will be equal as in 2018 but it still could have a major impact. In particular altcoins should be viewed with caution, as there does not pass a day, in which one cryptocurrency surges by 100%, which should certainly be a red flag. One example is Binance Coin (BNB), which traded consistently at $40 during January 2021 and rose to $335 during February. Despite its significant drop during the last day to $250, it is currently the third most valuable cryptocurrency with a market cap of $39bn. Other notable moves address decentralized finance (DeFi), which is expected to grow similarly as in 2020, during which its locked value rose from a few hundred million to $30bn at the end of 2020.
Figure 3: Bitcoin Price Development in 2021, Source: CoinMarketCap, February 2021
Figure 4: Comparison of Market Capitalization of Cryptocurrencies and Banks, Source: Companies Market Cap, February 2021
Figure 5: Bitcoin Price Targets According to Stock-to-Flow Projection, Source: Pantera Capital, February 2021
Private Equity / Venture Capital
Private equity and private debt will suffer from the same problem in 2021. After 2020, both asset classes sit on a record amount of dry powder, fuelled by new inflows and the lack of conducting business (especially early during the pandemic). This causes some pressure to commit capital and can lead to high competition between interesting investment projects, in particular as valuations are (for the most part) at very high levels. The outlook for private equity is a bit better than for private debt, as the industry AuM grew by 6% to $4.7tn and is likely to continue more inflows, especially from Asia. Within private equity, there are significant differences among strategies, buyout-based strategies had a rough 2020 and it will continue in 2021 albeit to a lesser degree. Venture capital (VC) had by far its in 2020 including a very good performance, which likely to cause increased demand.

 
Private Debt
Private debt has had more difficulties in 2020 than private equity but also managed to increase its AuM to $887bn. Covid-19’s impact on the industry was mostly short-term oriented and is likely to form a beneficial ecosystem for the industry. Global interest rates are close to or below zero in most countries and this is expected to remain in the foreseeable future, despite the currently rapidly rising interest rates of long-term US bonds. The industry had issues with fundraising in 2020 with being down 10% from the previous year. It is expected that fundraising will increase again in 2021, in particular in the strategies around distressed debt and special situations. This is largely due to arising opportunities in the market, caused by the financial aid of governments that helped keep businesses alive. Once those aids run out, it is likely to see a surge in defaults. Moreover, the industry sees increased allocations from Asia, similar as for private equity. The industry has seen a trend of consolidation towards larger funds, which mostly hit their fundraising goal in 2020, whereas smaller funds struggled to amass enough capital. This trend is expected to continue, although it is likely that smaller funds will be better off in 2021 compared to 2020.
 
Real Estate
Real estate certainly struggled the most among alternative assets, as Covid-19 and the governmental restrictions, e.g. the imposed lockdowns, were most severe for real estate compared to the previous asset classes. Despite the unfavourable economic conditions, the industry managed to grow by 5% in AuM in 2020. However, as of June 2020, it was the only asset class whose returns suffered substantially and went negative (-1.4%). Fundraising was also hit severely, as it dropped from $179bn in 2019 to only $118bn in 2020. In real estate, it largely depends on the type of real estate. Logistics for example, has performed well in 2020 and has prosperous outlook for 2021, due to the surge in online retailing, which requires place to store. Tourism-related real estate suffered tremendously in 2020 and it is unlikely to get better until at least summer 2021, more likely autumn or winter 2021, when Covid-19 is hopefully not such a big deal anymore when a critical mass of immunizations through either vaccinations or having had the virus has been reached. The industry additionally faces challenges in deploying its record amount of dry powder. This is caused by the scarcity of good investment and their respective valuations as well as the continuing uncertainty on the development of Covid-19.
STONE MOUNTAIN CAPITAL
Stone Mountain Capital is an advisory boutique established in 2012 and headquartered in London with offices Pfaeffikon in Switzerland, Dubai and Umm Al Quwain in United Arab Emirates. We are advising 30+ best in class single hedge fund and multi-strategy managers across equity, credit, and tactical trading (global macro, CTAs and volatility). In private assets, we advise 10+ sponsors and general partners across private equity, venture capital, private credit, real estate, capital relief trades (CRT) by structuring funding vehicles, rating advisory and private placements. As of 16th February 2021, Stone Mountain Capital has total alternative Assets under Advisory (AuA) of US$ 60.3 billion. US$ 47.6 billion is mandated in hedge funds and US$ 12.7 billion in private assets and corporate finance (private equity, venture capital, private debt, real estate, fintech). Stone Mountain Capital has arranged new capital commitments of US$ 1.65 billion across hedge fund, private asset and corporate finance mandates and has been awarded over 45 industry awards for research, structuring and placement of alternative investments. As a socially responsible group, Stone Mountain Capital is a signatory to the UN Principles for Responsible Investing (PRI). Stone Mountain Capital applies Socially Responsible Investment (SRI) filters to all off its alternative investment strategies and general partners on behalf of investors. 
 
Our Team   Our Mandates   Our Research   Our News
 
 

Contact

We are able to source any specific alternative investment search and maintain relationships with dozens of best-in-class hedge fund managers, private equity and private debt general partners (GPs) and real estate and infrastructure developers. We don’t pass any costs on to our investors, since our compensation comes from our mandated managers, GPs and developers. Please contact us, should you require further information about our solutions.  

Twitter
LinkedIn
Facebook
Google Plus
Website
Email
Schedule a call with the team
Main UK Tel.: +44 207 268 4905
Main Switzerland Tel.: +41 44 586 45 55
Main UAE Tel.: +971 4383 5386
We have updated our privacy policy to take into account the new requirements of the GDPR. Please take some time to read the policy, which explains what personal data we collect, why we collect it, how we use it and other relevant information. You can review our privacy policy here, our anti-bribery policy here and our commitment to the UK stewardship code here. Stone Mountain Capital LTD is registered (Reference: ZA589246) in the data protection public register of the Information Commissioner's Office ('ICO') in the United Kingdom.

No action is required if you wish to remain in contact, however please reply if you want your details removed by contacting us at info@stonemountain-capital.com or by using the unsubscribe button below. In case this newsletter has been forwarded to you and you want to subscribe, please click here.

Stone Mountain Capital is a limited company (LTD) registered in England & Wales with registered number 8763463. The registered address is: One Mayfair Place, Devonshire House, Mayfair, London W1J 8AJ, England, United Kingdom. Stone Mountain Capital LTD is authorised and regulated with FRN: 929802 by the the Financial Conduct Authority (‘FCA’) in the United Kingdom. Stone Mountain Capital LTD is the Distributor of foreign collective investment schemes distributed to qualified investors in Switzerland. Certain of those foreign collective investment schemes are represented by First Independent Fund Services LTD, which is authorised and regulated by the Swiss Financial Market Supervisory Authority (‘FINMA') as Swiss Representative of foreign collective investment schemes pursuant to Art 13 para 2 let. h in the Federal Act on Collective Investment Schemes (CISA). Stone Mountain Capital LTD conducts securities related activities in the U.S. pursuant to a Securities and Exchange Commission ('SEC') Rule 15a-6 Agreement with Crito Capital LLC, a U.S. SEC registered broker-dealer, and member of Financial Industry Regulatory Authority (‘FINRA’), Securities Investor Protection Corporation (‘SIPC’) and Municipal Securities Rulemaking Board (‘MSRB'). Stone Mountain Capital Partners LLP is incorporated as limited liability partnership in England & Wales with company registration number: OC430515. Its registered office is: One Mayfair Place, Devonshire House, Mayfair, London W1J 8AJ, United Kingdom.  Stone Mountain Capital Partners LLP is registered as Appointed Representative with FRN: 934964 of Stone Mountain Capital LTD which is authorised and regulated with FRN: 929802 by the Financial Conduct Authority (‘FCA’) in the United Kingdom. Stone Mountain Capital FZC is registered at: Business Center, Al Shmookh Building, Umm Al Quwain Free Zone, Umm Al Quwain, United Arab Emirates. All information in this perspective including research is classified as minor acceptable non-monetary benefits ('MNMB') in accordance with article 11(5)(a) of the MiFID Delegated Directive (EU) 2017/593 and FCA COBS 2.3A.19.

Copyright © 2021 Stone Mountain Capital LTD. All rights reserved.
Any business communication, sent by or on behalf of Stone Mountain Capital LTD or one of its affiliated firms or other entities (together "Stone Mountain"), is confidential and may be privileged or otherwise protected. This e-mail message is for information purposes only, it is not a recommendation, advice, offer or solicitation to buy or sell a product or service nor an official confirmation of any transaction. It is directed at persons who are professionals and is not intended for retail customer use. This e-mail message and any attachments are for the sole use of the intended recipient(s). Our LTD accepts no liability for the content of this email, or for the consequences of any actions taken on the basis of the information provided, unless that information is subsequently confirmed in writing. Any views or opinions presented in this email are solely those of the author and do not necessarily represent those of the limited company. Any unauthorised review, use, disclosure or distribution is prohibited. If you are not the intended recipient, please notify the sender by reply e-mail and destroy all copies of the original message and any attachments. By replying to this e-mail, you consent to Stone Mountain monitoring the content of any e-mails you send to or receive from Stone Mountain. Stone Mountain is not liable for any opinions expressed by the sender where this is a non-business e-mail. Emails are not secure and cannot be guaranteed to be error free. Anyone who communicates with us by email is taken to accept these risks. This message is subject to our terms at our Disclaimer.
 

Comments are closed.
    British Pound Exchange Rate
    Tweets by @stonemountainuk
    Tweets by @stonemountainch
    Tweets by @stonemountainae
    Tweets by @stonemountaincp
    Tweets by @stonemountaincp
    Tweets by @OliverFochler
    Tweets by @ChotaiAshvin
    Tweets by @hasler_pascal


    ​Archives

    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    April 2019
    January 2019
    November 2018
    August 2018
    May 2018
    February 2018
    December 2017
    November 2017
    October 2017
    June 2017
    March 2017
    February 2017
    January 2017
    November 2016
    October 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015

    Categories

    All
    Bitcoin
    Blockchain
    China
    Corporate
    Credit
    Cryptocurrency
    CTA
    Direct Lending
    Emerging Markets
    Equity
    ETF
    Ethereum
    Fund Of Hedge Fund
    Global Macro
    Hedge Fund
    Index
    Middle Market
    Private Debt
    Private Equity
    Rating
    Real Estate
    Risk Premia
    SME
    State Owned Enterprise
    Stocks
    UCITS
    Venture Capital
    VIX
    Volatility
    VSTOXX

    RSS Feed

PRIVACY POLICY
ANTI-BRIBERY POLICY
UK STEWARDSHIP CODE
CONTACT
DISCLAIMER
ESG POLICY
Picture

​Stone Mountain Capital LTD is authorised and regulated with FRN: 929802 by the Financial Conduct Authority (‘FCA’) in the United Kingdom. 
The website content is neither an offer to sell nor a solicitation of an offer to buy an interest in any investment or advisory service by​
Stone Mountain Capital LTD and should be read with the DISCLAIMER.
© 2023 Stone Mountain Capital LTD. All rights reserved.
  • About
    • Partners
    • Ventures
  • Team
    • Oliver Fochler
    • Ashvin Chotai
    • Pascal Hasler
    • Alexander Rothlin
    • Claudio Calonder
    • Joaquin Abos
    • Alliances
  • Advisory
    • Corporate Finance
    • Solutions
    • Mandates
  • Research
    • Perspective Subscription
    • News
    • Awards
  • Contact
    • Privacy Policy
    • Anti-Bribery Policy
    • UK Stewardship Code
    • ESG Policy
    • Disclaimer
  • Login