Weekly Research Briefing: Last Call

August 31, 2021

As the summer of 2021 draws to its close, we get one final slow week in the markets to relax and enjoy that last bit of fun in the sun. Next week, the night-time temps will feel like they have dropped 20 degrees here in the U.S. as September hits, the kids run off to school and work ramps up. Of course, if you work in the private equity or credit markets like the many members of Hamilton Lane, summer was more of a dream. Rather than a summer slowdown, the number of new investment meetings has picked up significantly. New deals are happening in most every sector and geography as the world continues to accelerate from last year's COVID slowdown. Financial conditions and markets are favorable and business owners continue to optimize their corporate holdings and/or expand into new markets. Investors are looking to take profits on the higher valuations of both their public and private holdings, while also looking to deploy capital into those exciting new investments. There is so much going on right now, and I tip my hat to all of those putting in the big hours to help their clients.

So, if you learned anything from Jerome Powell's Jackson Hole presentation, it should have been that the financial markets are very ready and prepared for a tapering of the Fed's asset purchases. We know this because the markets jumped higher when Chairman Powell basically said the taper is near. So now investors should be moving to prepare themselves for the first rate hike. This should be a ways off as the Fed would prefer job growth to extend further (especially inside of dentist offices) and for COVID to move into the rear view mirror. The markets are betting on a first hike in early 2023.

This will be a slow, but interesting week. The big jobs number will come out on Friday and I'd wager the vast majority of investors and market participants will be watching from a beach, boat or body of water. Non-farm payrolls estimates look to be around the +750k level, but after last month’s big beat, anything is possible for a new number and revision. Above +1m and bond investors will feel the heat. Below +500k and they will be buying Friday night's round of drinks or s'mores. For equities, the jobs number will more impact the movements between cyclicals, growth and defensive stocks. Expect the lowest trading volumes of the year this week and enjoy your end of summer.

The market is pricing in the first full 25 bps hike by February of 2023...

The second 25bp hike near the end of the year.

Implied Fed Funds rate

Increasingly, other countries are moving to raise rates as South Korea did last week...

Bank of Korea Policy Rate


Ten-year rates took the Fed comments in stride last week...

10-Year US Treasury Yield


We have a big jobs number on Friday as many more Americans are looking for a better permanent position...

@LizAnnSonders: Americans’ assessment of labor market has improved significantly, with 72% now saying it’s a good time to find a quality job. @Gallup

Surge in Percentage Saying Its a Good Time to Find Quality Jobs

But, as they feel better about finding a good job, they are also pulling back on their future expectations...

No doubt the recent increase in COVID data has hurt consumer sentiment.

U. Michigan Consumer Expectations Index

A pause in the consumer is also being felt at the auto dealerships...

Evercore ISI Auto Dealers Sales Survey

July pending home sales also showed new uncertainty...

Pending Home Sales Down 8.5% y/y.
Charts of economic data are still all over the place.

Housing Pending Home Sales

Residential construction is now flying (and will increase further) as many homes have been bought for future delivery...

Here is months of new inventory by stage of construction.
Near record low completed. Somewhat above normal under construction, and record "Not started".

New Home Sales

Some holiday shopping advice...

Buy local, buy services, or buy gift cards because the major retailer shelves will not be full of inventory this holiday season.

Somewhere in the world’s busiest port of Shanghai, a container of fertilizer sits among tens of thousands of boxes, waiting for a ride to the U.S. It’s been on the dock for months, trapped by typhoons and Covid outbreaks that have worsened major congestion in the global supply-chain network.

While the fertilizer has been stranded there since May, the port is just one stop on the long journey from central China to the U.S. Midwest. Delays have stretched a delivery that ordinarily would take weeks to more than half a year. And that time frame will keep expanding, as the goods have barely started the roughly 15,000 kilometer (9,300 mile) trek.

This is the tale of one humble shipment and its arduous journey across the world. While some of the barriers keeping it from its final destination may be specific to this particular case, the journey is emblematic of the inertia that has gripped global trade during the pandemic.

An Arduous Journey


The supply chain dominoes...

Manufacturers are stacking up unfinished goods on factory floors and parking incomplete vehicles in airport parking lots while waiting for missing parts, made scarce by supply-chain problems.

Shortages of mechanical parts, commodity materials and electronic components containing semiconductor chips have been disrupting manufacturing across multiple industries for months...

Allegion’s order backlog has doubled to three to four months of production as the company waits for semiconductor chips and other electronic components to arrive for commercial lock systems. Mr. Petratis said some production lines have been repurposed to make products the company can still assemble.

CNH Industrial NV, which makes New Holland farm machinery and Case construction equipment, has several thousand partially assembled earth-moving machines, tractors and crop harvesters waiting for parts at plants. CEO Scott Wine said CNH risks falling further behind customer demand if the company ceases production until it has all the components it needs...

Honeywell said shortages of plastic resins, semiconductor chips and other components are a drag on sales growth in its business units that produce building systems, safety gear and productivity equipment for warehouses and factories.

Semiconductor chips’ scarcity has disrupted automobile production in North America, leading several assembly plants to idle production. General Motors Co. is storing thousands of new pickup trucks that lack chips or other components in airport parking lots near its Flint, Mich., plant. Ford Motor Co. parked new pickups at a race-car track outside of Louisville, Ky., while it waited for parts to complete the vehicles...

Howmet Aerospace Inc., which makes aluminum wheels for heavy-duty trucks, said its second-quarter sales volume of wheels dropped 7% from the first quarter, as shortages of chips and other parts led truck manufacturers to scale back truck assembly. John Plant, co-CEO of Howmet, said the truck makers halted wheel orders on short notice, causing stocks of wheels at Howmet to increase unexpectedly...

Industrial conglomerate Illinois Tool Works Inc. said it now has an order backlog of about $200 million, stemming mostly from components it can’t deliver to idled auto plants or other customers. Without the backlog and sales stalled by supply-chain delays, the Illinois-based company said second-quarter organic sales growth, which excluded revenue from acquisitions or currency fluctuations, would have been about 10 percentage points higher.

Steelmaker Cleveland-Cliffs Inc. reported that its inventory of steel rose by about $300 million during the second quarter because shipments to automotive customers were 20% less than the company expected. Cliffs said it was able to redirect some of that steel to the spot market, where the company was able to sell it for higher prices than the auto makers typically pay under purchase contracts with the Cleveland-based steelmaker.


Even aluminum is feeling the impact of the global supply chain disruption...

Aluminum prices are reaching 10-year highs, as buyers far from storage centers in Asia compete to line up shipments for use in beverage cans, airplanes and construction.

Aluminum forwards on the London Metal Exchange have climbed by a third this year to about $2,650 a metric ton. Prices are around 80% higher than at their low point in May 2020, when the pandemic hammered sales to the aerospace and transportation industries...

There is enough aluminum to go around globally. The trouble is that much of the metal is sitting in Asia, and buyers in the U.S. and Europe have struggled to get their hands on it. Ports such as Los Angeles and Long Beach are jammed with a crush of orders from companies hustling to restock inventories and prepare for the holiday shopping spree. Containers used to move industrial metals are in short supply, and traders are feeding rocketing freight costs through to customers.

Change in price in London since 2020


It doesn't seem right that all the United States should be penalized because only a few states refuse to put on masks...

This will only add more pressure to the airline industry which makes large profits on their cross-Atlantic routes.

BRUSSELS—The European Union recommended halting nonessential travel from the U.S. because of the rise of Covid-19 cases, diplomats said Monday, ending a summer-vacation reprieve for American tourists.

The decision came amid the growing spread of the Delta variant in the U.S., where vaccination rates have also now fallen behind the average rates of shots in EU countries.

The EU travel list, which is reviewed every two weeks, isn’t binding on member states, but it has generally set the pattern for who can visit the bloc. The EU decided in June to add the U.S. to its safe list.

Still, member states retain control over all the rules for tourist travel, such as whether to impose quarantines on unvaccinated travelers and which certificates to accept as proof of having received a vaccine.


Few expected the South to single-handedly lift the U.S. hospitalization data above that of Europe...

Daily Popluation Hospitalized for Covid

(Goldman Sachs)

Equity mutual funds have been cutting their FAAMG exposure for 5 years...

But, that is an interesting bump higher this quarter.


(Goldman Sachs)

Speaking of which, it is always good to review how the key equity benchmarks are composed...

And, I see you AMC. Enjoy your current weight in the spotlight.

Comparative sector composition of major US equity market indices

(Goldman Sachs)

The team in Asia put together these charts for me to share, which hopefully shed light on the ongoing activity in China...

Not only is new fund activity still meaningful, but exits via IPO continue to occur with listings across all the major markets. So, for those with a long-term positive view on China, this pull back in prices in the public markets could be creating many opportunities.

  • China remains a primary source of private markets activity due to the scale of its economy, GDP growth profile and most importantly, its track record of generating IPO exits.
  • Long-term LPs continued to support China-focused fundraising efforts, particularly among established players who were raising subsequent funds or complementary products.
  • In July 2021, 69 Chinese companies completed IPOs globally across A-shares (48), H-shares (20) and the US (1), representing an increase in HK listings and a decrease in U.S. listings.

Number of new funds launched


Number of IPOs and funds raised


PE-backed China IPOs


With Q1 private markets data now available, let's look at the performance...

What the Markets Have Done

MSCI World used as proxy for public equities.

Digging even deeper into the Q1 2021 numbers, here is how PE buyout and private debt vintages have performed...

Pooled Returns by Vintage Year

Meanwhile, this chart will show you why you may not run into our Investment team on the beach this weekend...

Opportunities Received by Hamilton Lane

It is a simple decision...

You can either buy a very nice house, or you can buy the digital image of the below rock.

Tweet from @etherrockprice

Also, it is unlikely that your home will disappear with one click of the mouse...

In June, a major NFT artist who goes by Fvckrender said he lost the equivalent of $4 million in cryptocurrency after he opened a file sent to him over social media that contained a virus. Within minutes, it nearly emptied his online wallet as he scrambled to move his remaining funds to another, safe account. “I’m an idiot,” he tweeted afterward...

Problems extend beyond the typical growing pains and glitches of a new art arena, in part because victims say they find so little recourse. Collectors who inadvertently buy fake or stolen art in the real world can often seek refunds or a legal remedy—but legal odds can be slimmer in the opaque realm of cryptocurrency. (If a scam involves fraudulent purchases made with a stolen credit card, the card owner can still report the fraud to their credit-card company and the money can usually be refunded.)

Benny Taveras, a 39-year-old Canadian investor, said he spent around $700 in the cryptocurrency known as ether buying seven looping video NFTs he thought were being sold by Mr. Rajkovic. Mr. Taveras later reached out to the artist over social media and was told the sale was a scam. “I was devastated,” he said in an interview. “Not only did I lose out on a sale, but it was discouraging. I second-guess myself whenever I want to buy new artists now.”

Mr. Taveras, who said he has spent more than $120,000 amassing tokenized art in the past three months, said he now emails artists to vet their NFT offerings before he makes any purchases. And he no longer opens any links that get sent to him over social media. “All it takes is one click,” he said.


Tweet from @mark_dow

Enjoy that last cone. See you next week...

Melting ice cream cone



All Private Markets -  Hamilton Lane’s definition of “All Private Markets” includes all private commingled funds excluding fund-of-funds, and secondary fund-of-funds.

Credit – This strategy focuses on providing debt capital.

Co/Direct Investment Funds – Any PM fund that primarily invests in deals alongside another financial sponsor that is leading the deal.

Private Equity – A broad term used to describe any fund that offers equity capital to private companies.

Secondary FoF – A fund that purchases existing stakes in private equity funds on the secondary market.

Real Estate – Any closed-end fund that primarily invests in non-core real estate, excluding separate accounts and joint ventures.

Credit Suisse Leveraged Loan Index – The CS Leveraged Loan Index represents tradable, senior-secured, U.S. dollar-denominated non-investment grade loans.

PME (Public Market Equivalent) – Calculated by taking the fund cash flows and investing them in a relevant index. The fund cash flows are pooled such that capital calls are simulated as index share purchases and distributions as index share sales. Contributions are scaled by a factor such that the ending portfolio balance is equal to the private equity net asset value (equal ending exposures for both portfolios). This seeks to prevent shorting of the public market equivalent portfolio. Distributions are not scaled by this factor. The IRR is calculated based on these adjusted cash flows.

The information presented here is for informational purposes only, and this document is not to be construed as an offer to sell, or the solicitation of an offer to buy, securities. Some investments are not suitable for all investors, and there can be no assurance that any investment strategy will be successful. The hyperlinks included in this message provide direct access to other Internet resources, including Web sites. While we believe this information to be from reliable sources, Hamilton Lane is not responsible for the accuracy or content of information contained in these sites. Although we make every effort to ensure these links are accurate, up to date and relevant, we cannot take responsibility for pages maintained by external providers. The views expressed by these external providers on their own Web pages or on external sites they link to are not necessarily those of Hamilton Lane.

Enjoy the WRB? Subscribe today.

Recent Content


Weekly Research Briefing: Not a time to stick your neck out

With massive volatility continuing across all financial market assets and significant selling volumes outpacing significant buying ones, now is a time for equity investors to play defense.

Read the Research Article

2022 Private Markets Dashboard

As one of the largest investors and allocators of private markets capital globally, we occupy a unique position within our asset class, partnering with premier GPs from around the world. The Private Markets Dashboard captures the opinions and expectations of a broad group of those managers, offering insight into where the global investment community believes the markets are headed.

Read the Research Article

Lunches with Legends: Redefining Private Markets Leadership

Hamilton Lane CEO Mario Giannini sat down with Prime Quadrant CEO Mo Lidsky on the latest episode of Lunches with Legends, a fireside chat series that spotlights some of the most illustrious individuals in the financial world.

View the Media Coverage

FPO We use cookies to improve user experience, and analyze web traffic. For those reasons, we may share your site usage with our analytics partners.

Learn More