Alternative assets were no match for 2020’s juiced-up stock market

Some investors chose to channel more capital toward alternative investments, though their 2020 returns didn’t come close to those from traditional assets. Citing data from eFront, the Journal said private equity returns last year were -8.9% while venture capital dipped -1.4%. And while hedge funds provided valuable downside protection in the wake of the initial March downturn, data from PivotalPath showed their total 2020 returns at a comparatively unimpressive 6.3%.

Professor Steven Kaplan of the University of Chicago Booth Business School told the news publication that venture firms were able to hold up fairly well due to the COVID-accelerated adoption of technology. But within private equity, leveraged buyout firms were hurt: “If you have a hit to your cash flows, it’s going to get a bit magnified on the downside by the debt,” he said.

Returns on rarefied assets favoured in the high-net-worth space were similarly unimpressive when stacked up against stock indexes. Coloured diamonds, as monitored by specialist investment house Amma Group, were up 11%. Classic cars, according to Historic Auto Group International, were up 5.9%; founder Dietrech Hatlapa told the Journal that some owners put their automobiles up as collateral for loans and, more recently, smart buyers are snatching collectibles up as an inflation hedge.

Fine wine, based on data from Liv-ex, was up just 4.7% in 2020; collectible art, according to Art Market Research, fell -10.4% as the pandemic brought auction activity to a halt. “Collectors increasingly expected to pay ‘Covid-prices’ and average values were down by the end of the year,” said Art Market Research CEO Sebastian Duthy.

Of course, one could say any attempt to compare the returns of publicly listed U.S. stocks and alternative assets last year is not entirely fair; after all, the performance of U.S. equities last year was enabled greatly by the “doping” effects of stimulus from central banks and government. And if the words of David Rosenberg, founder of independent research firm Rosenberg Research & Associates, are anything to go by, it seems everyone’s gambling rather than investing.

Leave a Reply

Your email address will not be published. Required fields are marked *