Oct 31, 2020



Oct 31, 2020



Near-zero yields are making it difficult for pensions and endowments to hit the targets they need to meet their future obligations. It’s pushing disciples of the classic investing strategy of 60% stocks / 40% bonds to get more creative.

As an example, the $400b California Public Employees’ Retirement System (CalPERS), which provides benefits for 2m current and future retirees, must earn an annual return of at least 7% to meet those obligations. That’s not an easy task when the safe investments that pension funds usually rely on are paying sub 1%.

Creative CIOs are shifting into assets once considered on the fringes of conventional investing such as single-family rentals, digital assets, supply-chain finance, entertainment royalties, and catastrophe bonds. Institutional investors are now allocating an average 26% of their assets to alternative strategies (up from 11% in 2006).

While Bowie bonds may have pioneered asset-backed royalties for the musician's hits in 1997 (Farewell Major Tom, FTC Newsletter Jan 2016), some of these alternative assets are now investable (at-scale) for the first time through modern data and tech-driven asset managers.

We have no doubt that allocators will continue to seek higher returns via more esoteric asset-backed structures. For asset-managers not willing to get creative (and perhaps skip dressing-up for Halloween), they will have to call 1-800-NO-YIELD and trade “risk-free” government debt.

Portfolio News

In a zero yield world, real estate investors turn to proptech for alpha - Today, institutional investors target just 2% of the available residential real estate market; that’s because in order to deploy capital at a scale they have to buy multi-family developments, build-to-rent, or secondary portfolio acquisitions; these strategies are expensive, exposed to development or concentration risk, occupy secondary locations, and can take years to generate income. Portfolio company IMMO Capital inverts the market with state of the art technology to unlock access to 98% of the residential market inaccessible to investors – “Single-Family Rentals ”or “Single Apartment Rentals” (“SFR”). Read more

Sigma Ratings announces Fitch Group as investor to drive expansion of its risk intelligence platform - Congratulations to portfolio company Sigma Ratings on the announcement of the new investment, which will be used to accelerate Sigma's growth and strengthen its position as the category-creator of scalable entity risk scoring. Sigma also plans to develop and expand its distribution through Fitch's operations in more than 30 countries. Read more


The 40 in 60/40 portfolios is getting wilder and wilder - Rock-bottom yields are making it harder than ever for pensions, endowments and other money managers to hit the targets they need to meet their long-term obligations. As a result, fund managers are now shifting fixed-income allocations to assets once considered on the fringes of conventional investing -- things like whole-business securitizations, entertainment royalties and catastrophe bonds. Read more

Lengthy era of rock-bottom interest rates leaving its mark on U.S. economy - Aging populations, subpar productivity growth and a once-in-a-century global pandemic led the Fed earlier this year to return its benchmark borrowing rate to near zero and to resume large-scale buying of corporate and government securities. The Washington Post explores the implications. Read more

Industry News

Ant IPO by the numbers: it’s bigger than Finland’s GDP - Ant’s IPO puts the company’s valuation at dizzying heights. At about $315b, Ant is worth more than the gross domestic products of Egypt, Chile or Finland. For corporate comparisons, it’s bigger than JPMorgan Chase, the biggest U.S. bank. Ant is larger than payment rival PayPal, media giant Disney and dwarfs Bank of America. It’s three times bigger than tech giant IBM and four times larger than Goldman Sachs. Read more

TikTok and Shopify partner on embedded payments - The integration will allow merchants to create and connect their TikTok business account and launch shoppable video ads directly within Shopify. The merchant simply selects the product they’d like to feature in the video and combine their existing imagery or video with a selection of pre-made templates designed for commerce. Read more

Credit Karma in talks to sell tax-preparation business to Square - The move is meant to head off potential antitrust objections to the personal-finance portal’s pending $7.1b sale to TurboTax maker Intuit. A sale of the unit would require approval from the Justice Department, which is concerned that bringing together Credit Karma’s small but growing tax-preparation business with industry-leading TurboTax would leave taxpayers with fewer, and potentially pricier, e-filing options. Read more

This is Goldman’s bet to break into a $32b industry serving the world’s biggest corporations - Goldman has just released software that allows clients to embed banking services into their own products as part of a push to break into the $32b a year industry managing cash for big corporations. Read more

Getting down with the cool kids on bitcoin - The Economist compares the "Blitz Kids", a mix of art students and urchins who frequented the Blitz wine bar in Covent Garden in the 1979-80 and would go on to shape popular culture, to the oddballs, fantasists and drop-outs who are helping to the oddballs, fantasists and drop-outs who are helping to push Bitcoin into the mainstream. Read more

Could negative rates signal the end of free banking? - The UK has carved out its own peculiar niche the “free in-credit banking model”. Current account customers at HSBC in the UK will look at charging for basic banking services, because it was losing money on large numbers of accounts. Read more

Stripe Climate is a new tool to let customers make carbon removal purchases - Stripe is launching a new tool that clients can integrate to set up automatic contributions that are made as a percentage of each transaction. For now, users of Stripe Climate can't choose how their contributions get invested; they basically mirror the path of those being made by Stripe itself. Read more

For years J.P. Morgan was skeptical of Bitcoin. Now the bank’s analysts say its value could triple, challenging gold - J.P. Morgan’s bullish stance is driven in part by PayPal's recent decision to offer Bitcoin to its customers and Square’s recent move to add $50m of the cryptocurrency to its balance sheet. Another major factor for its position, though, is the demographic trend in which younger generations are choosing Bitcoin over gold. Read more

Fintech startup SoFi gets preliminary approval for U.S. bank charter - Social Finance Inc has received preliminary, conditional approval from the U.S. Office of the Comptroller of the Currency (OCC) over its application for a national bank charter, the company said on Wednesday. Read more

Visa to acquire LatAm API-based payments fintech company YellowPepper - The card issuer giant made an undisclosed strategic investment in the start-up back in May 2018. Now merged, the two plan to offer “a flexible and low-cost platform” which “connects to multiple networks for new flows” throughout LatAm and beyond. Read more

Bitcoin returns to post-bubble levels last seen in early 2018 - Proponents of digital assets say the recent rally isn’t another speculative frenzy among individual investors. They point to rising institutional interest, PayPal's decision to allow customers access to cryptocurrencies and the use of JPMorgan Chase & Co.’s JPM Coin to make a payment for the first time. Read more

ECB glitch reduced bank deposits by more than 400b euros - The cash remained in banks’ current accounts, and the balances have since returned to normal. Still, the incident highlights the critical role of the payments infrastructure for the euro area, and the risks that could be posed from a longer outage. Read more

Pandemic creates big audience for wage access fintechs - In spite of rising concerns that the apps could be worse for consumers than the payday lenders they aim to replace, earned wage services have taken off as hourly workers seek quick cash during the pandemic, fuelling an explosion of apps that have either opened for business or raised new cash in the past few months. Read more

One in five holiday dollars will be spent online: Mastercard - E-commerce, already on a tear before the pandemic, will capture one out of every five dollars spent in the U.S. this holiday season, according to a new survey from Mastercard. Read more

An avalanche of fraud buried a small-business relief program - Bloomberg explores how it seemed like everyone made a bogus application to the Small Business Administration’s Covid-19 Economic Injury Disaster Loan program. Professional thieves from Russia to Nigeria cashed in. Low-level employees at the agency watched helplessly as misspent money flew out the door. Read more

NerdWallet acquires Fundera, the go-to small business resource - Through this acquisition, NerdWallet will expand its financial guidance and financing options for small business owners, establishing a stronger foothold in the SMB market and advancing its mission of providing clarity for all of life's financial decisions. Read more

Alliance Data to buy fintech startup Bread for $450m - Alliance Data, which provides customer loyalty services and products like co-branded and private label credit cards, plans to offer Bread's installment payment solutions for its brand partners. Read more

Select Financings

Bluefin - Atlanta based provider of payment and data security services raised $25m in growth funding led by Macquarie. Read more

Conductor - Sao Paulo based payments company raised $150m in new funding led by Viking Global Investors. Read more

DriveWealth - New Jersey based global digital trading technology company raised $56.7m in Series C funding led by Point72 Ventures. Read more

Fabric - New York based family finance planning startup raised $18m in Series B funding led by CNO Financial Group. Read more

Finmark - Raleigh based financial modeling software provider for startups raised $5m in Seed funding led by IDEA Fund Partners. Read more

Finova - India based lender to small and mid-size businesses raised $35m in Series C funding led by Sequoia Capital India and Faering Capital. Read more

Goodcover - San Francisco based provider of online insurance services raised $7.5m in Series A funding led by Goodwater Capital. Read more

Jiko - Berkeley based trading and money management platform raised $33m in Series A funding led by Upfront Ventures and Wafra. Read more

Keyrock - Brussels based digital asset market maker raised €4.3m in new funding led by SIX Fintech Ventures and MiddleGame Ventures. Read more

Lunar - Denmark based challenger bank raised $47m of Series C funding from Chr. Augustinus Fabriker, Klaus Oestergaard and Alan Howard. Read more

PrimaryBid - London based fintech platform for connecting retail investors with public placements raised $50m in Series B funding from London Stock Exchange Group, Draper Esprit, OMERS Ventures, Fidelity, and ABN AMRO Ventures. Read more

RealBlocks - New York based tech platform for alternative investment access raised $7m in Series A funding led by Crosslink Capital. Read more

StreetShares - Virginia based provider of small business lending software for banks and credit unions raised $10m in new funding from Motley Fool Ventures and Ally Ventures. Read more

Tomo Networks - Stamford based mortgage and transaction company raised $40m in Seed funding led by Ribbit Capital, NFX and Zigg Capital. Read more

Transcend - New Jersey based provider of optimization software for financial firms raised $10m in Series A funding led by Nyca Partners. Read more

Wise - San Mateo based embedded banking startup raised $12 million in Series A funding led by E.ventures. Read more


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