How Fintech platforms are creating new, highly lucrative investment markets in a low yield world and driving exponential ROI in the process.
In a volatile (and extremely fluid) investment market, finding companies that show predictable growth has never been more important. Traditional investment products - previously the hallmark of predictability - have recently been hamstrung by a decade’s worth of crisis-driven financial policy that has combined to push interest rates to near zero (or, in the case of the EU, into the negative). The net result has been a deep cut into ROI across most traditional investment vehicles. In this environment, investment products that can drive real, credible and repeatable returns have become extremely desirable and expensive.
Enter Fintech platforms, which are transforming investment risk to return profiles through the securitization of assets with best in class data. They're allowing LPs (and anyone else) the ability to invest in alternative asset classes that drive high rates of return without having to plunk down correspondingly exorbitant monies to participate. By democratizing investment, financializing “everything” and demystifying process through data and transparency, the investment ecosystem has been fundamentally transformed and likely won’t revert back to “normal” even after rates eventually climb.
Pre-pandemic negative yielding debt was already an estimated $17.0 trillion USD. Unprecedented global fiscal & monetary stimulus packages designed to buoy struggling economies combined to drive those numbers even higher. The Fed, BoJ, Swiss National Bank, BoE, ECB all had balance sheets expanding by $5.5 trillion YTD from $16.0 trillion to $21.5 trillion. Unsurprisingly, this was the biggest shift since the crisis of 2008.
Fed Chair, Jerome Powell, recently said the Fed was “not even thinking about thinking about raising rates.” They also recently released a statement noting that, “the Committee seeks to achieve inflation that averages 2 percent over time, and therefore judges that, following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.”
This commitment from the Fed has put the onus on investors to reassess portfolio allocation & search for alternative sources of return. That’s where Fintech platforms are stepping in to fill the gap by utilizing technologies like blockchain and machine learning to securitize assets and democratize capital formation. Primarily, these Fintech platforms now enable every class of investor the opportunity to invest in everything from Art and Farmland to Automobiles and bulge bank products such as large, securitized private debt.
AcreTrader is one such example. They’re an alternative investment platform that allows everyday investors the opportunity to invest in farm assets. CEO Carter Malloy has described the platform as the Robinhood of Farmland, providing access to an asset class - long the sole purview of big banks and institutional investors - with 30 year returns of around 11-12%.