Alternative assets can be broadly defined as assets that fall outside the traditional definition of stock, bond or currency investments. Over the past several years, access to investment in alternative assets, such as startups, investment funds, or real estate projects, has been democratised.
Various platforms have been created over the past decade to allow individual investors to participate in private markets that would otherwise not have been available to them. latest trend? Access to Investing in Culture – Opening up a new asset class.
Investment platforms like Alt, SNKRS, Rally Rd, Otis, and GOAT not only allow individuals to purchase a new asset class in a curated manner, but also allow partial ownership of the same properties.
While investing in culture has been a big trend, the boom in alternative asset investing covers a range of verticals from NFTs to real estate, arts, crypto, to farm. The movement towards “financialization of everything” will enable individuals to create and earn value based on their interests and competencies. Investing in property will move away from a market owned by “financial professionals” and will instead usher in a new class of investor.
in the news
On Wednesday, January 12, it was announced that streetwear e-commerce platform StockX is looking to go public during the first half of 2022.
The final value of the company was $3.8 billion after raising $60 million in Series E capital in April 2021. In addition, it was announced that StockX has tapped investment banks Goldman Sachs and Morgan Stanley to work on the transaction.
What is StockX? The company is an e-commerce platform that connects buyers and sellers of designer and streetwear accessories, footwear, electronics, luxury watches and other collectibles. The company has recently expanded its offering to a greater range of consumer goods as a platform that captures various verticals within the “culture” space. Gaming consoles, consumer electronics and after-fad accessories are often listed because the platform is agnostic to product type (SKU) and instead focuses on capturing a cultural enthusiast.
StockX is one of the “culture” investment platforms that will grace the public markets. eBay and Craigslist are successful examples of Internet retail marketplaces that have existed and flourished in the past. The likes of StockX and other similar marketplaces represent an “unbundling” of existing business models.
This unbundling can be seen in more than just the Culture Market. Earlier this month, the fanatics agreed in principle to purchase the TOPS trading card for $500 million. Additionally, the PSA/Collector Universe was taken private for $850 million in late 2020 as the trading card and sports nostalgia market saw its initial spike during the pandemic.
Either way you cut it, alternative asset investing is going mainstream.
As we look at the current market for alternative asset investing, various verticals have been formed as investors seeking new and innovative platforms to invest in drive interest. Below, we’ve outlined some of the main verticals that have seen new investment platforms. The map covers some of the biggest players that we have identified and believe provide a representation of the current market.
Our market map provides context for how capital has flowed across these various platforms over the years. According to funding data, currently the highest areas of concentration can be distilled into the following categories:
- basic infrastructure
- equity crowdfunding
What we can see from the formation of these different verticals is that investments are shifting from public assets (stocks, bonds, ETFs) to private ones, such as in our market map above.
Previously, these private markets were not accessible to the wider public. But with the introduction of fractionalization and platform trading, we can expect a change in capital. For context, JPMorgan and BlackRock released their Global Alternative Outlook which includes how institutions spend on traditional alternative assets. Both investment firms highlighted the amount of increase in investment in alternative assets and cited lower interest rates as one of the driving factors. More specifically, the institutional market for alternative assets in 2021 saw the following:
- $1.1 trillion in new assets under management in private debt, infrastructure, natural resources, private equity (“PE”), and real estate.
- Total alternative assets under management exceeded $9 trillion.
- The new funding brought PE investments of $737 billion and total PE under management to $5.8 trillion.
why is it important? Institutional investors (such as large banks, pension funds, insurance companies, etc.) have historically dominated more than 90% of all markets – both public and private, according to the NASDAQ. However, retail investors have seen a surge in volumes in recent years, especially during the pandemic period with large increases. This trend suggests that retail investors (i.e. non-institutions) have been more active in the larger markets, which is a positive sign for the newly formed alternative asset markets.
The overall macro trend of everyday individuals accessing the market actively seeking to earn returns and participate in investment activities is a positive tailwind for the adoption of alternative assets – an asset class that has been a gateway to a large population. opens.
NFT Market vs Collectibles
To look at the market for options on a more nuanced level, we will examine NFTs and trading cards, two verticals that have seen incredible growth during the pandemic to date. In terms of trading cards, the pandemic saw a huge increase in the adoption and value of these assets. According to eBay data, domestic card sales saw a 142% increase in 2020, indicating that 4 million more cards changed hands compared to the previous year. An additional note: according to a study by PWCC, if you had invested in high-end trading cards (Sports, Pokemon, etc.) in 2008 instead of the S&P 500, your return would have been 175% versus 102%.
Looking ahead, the market size of trading cards domestically is projected to grow from $10.6 billion in 2020 (last recorded data) to $62.1 billion in 2027, according to a study by Research & Markets. The growth represents an annual growth rate of 28.8%.
NFTs are also rapidly gaining traction. According to data from blockchain research firm DappRadar, the total NFT volume traded in 2021 was $16.7 billion, including Web3 assets, and $13.1 billion, including NFTs alone. The number represents a nearly 43,000% increase from 2020, when trading volume reached just $33 million.
However, it is important to note that some trends persist at a higher rate than others. When looking at search volume traffic and Google Trends data, it appears that NFTs have sustained internet interest, while trading cards have seen a steady decline or “flatten” since the height of the first wave of the pandemic. . Collectibles as a whole are also showing increased interest. Supporting data are included below:
We look forward to increased adoption across all platforms, regardless of vertical. The broader trend of retail investors to increase their overall investment activity will make the most of the change.
What difference does it make?
The big picture indicates that transaction platforms (think anything from PayPal to Airbnb) have the potential to scale, generate revenue, and be successful in the current market. While there will be winners and losers, as with any market, there are signs that these platforms may see some mass adoption. In future, big investment managers like BlackRock, Nuven, Invesco, Vanguard etc are likely to partner with platforms like Goat or StockX to create genuine ETFs for people to invest in the stock market.
The possibilities are wide in the “financialization of everything” version of the world. From the perspective of culture investment, the game industry sits squarely in the middle of the trend. We are expecting continued growth from a platform perspective and also from a market share perspective.