May 23, 2020



May 23, 2020



The top five stocks (FAANG) now make up over 20% of the S&P 500 index, and over 40% of the Nasdaq 100. This is double the concentration at the height of the dot-com bubble as certain industries are severely impacted by the pandemic including energy, retail, and travel.

While it is not unprecedented for companies to dominate the S&P 500 (Exxon, IBM, AT&T), this time (aka Corona time) is marked by new companies quickly rising up through the ranks. Zoom now has a market cap of $50b (from an IPO valuation of $10b a year ago) and is worth more than the entire U.S. airline industry!

The S&P 500 was created in 1957 and today only 60 of the original 500 members remain. As original members have dwindled, so has the average tenure of companies in the index. In 1964, the average index tenure of an S&P 500 company was 33 years. In 2016 the tenure declined to 24 years and is expected to shrink to 12 years.

Once a quarter, the index committee determines any changes to the list of companies. To be allowed entry into the S&P 500 today, a company must have a market cap of at least $8.2b, sufficient liquidity, and consistent profitability. 30 underperforming companies may be on the chopping block this quarter, which is greater than the annual average over the last three decades and would be one of the busiest years.

With some dropping out, the committee will have to add names to the index (with the risk of including too many tech companies) which typically sends the stock up by 4-7% as passive funds pour into the stocks.

While the S&P 500 currently encompasses roughly 80% of the entire US stock market and nearly $10t in assets is benchmarked or directly linked to it, it is fair to say that, like this gentlemen’s ride, it is top-heavy.

Portfolio News

Antler & FTC co-host discussion on COVID impact in emerging markets - As global investors, we will be sharing views on the main effects of the pandemic for entrepreneurs across EM regions. Join us on Wed May 27, 2020 at 8 AM EST/8 PM SGT. Join Us

How fintech firm Flutterwave adapted to help small African businesses during lockdown - Portfolio company Flutterwave is launching an e-commerce platform for African companies (akin to Shopify), with digital payments and logistics fully integrated. With so many brick-and-mortar retailers unable to operate during the coronavirus pandemic, the platform promises to further accelerate the transition to e-commerce and the digital economy. Read more

iCapital buys rival Artivest, capping iCapital's 500% plus run on 'alternatives' platform to $55b - Portfolio company Artivest's technology will combine well with iCapital's reach. The combined platform will service $55b in assets across 650 funds, 115k accounts and 70 white-label partners. Read more

Introducing Plaid Exchange - Plaid Exchange gives financial institutions, from banks to wealth management firms, an open finance platform to manage consumer data connectivity. Portfolio company Plaid is giving consumers the ability to maintain control and transparency into where and how their financial information is permissioned and shared. Read more


Drastic makeover looms for world’s most followed stock index - More than 30 firms may be removed from the S&P 500, according to DataTrek. Recently removed companies have drastically underperformed including oil and gas companies (Chesapeake Energy and Transocean are still off by 80%) and retailers (Bed Bath & Beyond and Macy’s are down roughly 70%). Read more

The art and science of stewarding the S&P 500 - The index committee is comprised of 10 members who are full-time employees of S&P Global, their identities other than 2 directors are kept secret. They meet once a month to discuss the potential revisions to the index and votes are decided by a simple majority. Read more

The myth of oligarchic dominance in the S&P 500 recovery trade - While it may seem that tech and healthcare names are outperforming all the other stocks, as news of a vaccine come to light small-caps surged, cruise ship operators and hotel chains jumped more than 10% while purveyors of toilet paper and soup plunged. Read more

Industry News

The hot wealth tech: humans - Being at the back end of a network of independent investment advisers is an increasingly attractive way to gain scale. Even when people can trade online in a bevy of ways by themselves, many still seek out trusted advice of some kind from a human. Read more

The FT explores how coronavirus turned the business of trading at banks on its head - The head of currency trading at an investment bank in New York said “We used to think of working from home as spending time with the dog! It had a bad reputation but it turns out that was completely wrong." Read more

Monzo co-founder Tom Blomfield moves from UK CEO role to president - Tom Blomfield is stepping down as UK chief executive of Monzo, the digital bank he co-founded 5yrs ago, as the popular start-up battles severe headwinds as a result of the pandemic. Read more

Shopify announces a new merchant debit card and support for payment installment plans - The Canadian e-commerce giant launched two finance products today: a merchant debit card and payment installment plans for customers. Shopify hosts over 1m merchants on its platform. Read more

Venture Investors Make Leap Into Fully Remote Deals - According to PitchBook a venture investor is more likely to write a check without an in-person meeting if at least one other investor in a deal has met the founders. VC's are also favoring companies selling software, rather than those making a physical product. Read more

The relentless ambition of BlackRock’s Aladdin - Aladdin (aka Asset Liability and Debt and Derivative Investment Network) is rolling out new updates as the asset management giant tries to take over even more of the portfolio management software market competing with State Street and Two Sigma's products. Read more

Crypto hedge funds struggle to recover from ‘bloodbath’ - After a strong April, the total value of the crypto market comes to $265b. Crypto hedge fund returns are at 13.4% this year - compared to the average of -6.7% year-to-date across the wider hedge fund industry. Read more

PayPal sees rise in ‘silver tech’ as older generations test digital payments - People over 50 were PayPal’s fastest-growing segment from March to April. Venmo particularly stands to benefit from the new audience with over 52m users. Read more

PayPal looks to ease contactless payments in stores - Given the worldwide growth of cash skepticism, the payments company is rolling out a new QR code feature for its mobile app in 28 countries. The product is ~25% cheaper for merchants than other payment products. Read more

Pressure growing for PPP loan forgiveness timeline extension - This 8-week forgiveness period is what Congress is currently looking at expanding. The CARES Act was bipartisan, which means both sides of the aisle have a vested interest in its success. Read more

General Atlantic and KKR invest $2.4b in India’s Reliance Jio Platforms - The announcement further illustrates the growing appeal of Jio Platforms, which has raised $10b in the past month by selling about 17% of its stake to foreign investors. Read more

Bolsonaro restricts using fintech to pay emergency aid in Brazil - Among other passages, Bolsonaro vetoed the possibility of using fintech in the payment of R$ 600 emergency aid. The veto can still be overturned by Congress. Read more

Brazilian CVM launches rules for regulatory sandbox to deliver innovation - The initiative aims to foster entrepreneurship and the development of the Brazilian capital market through the creation of an experimental regulatory environment. Read more

Insurance comparison firm SelectQuote raises $360m in IPO - Kansas based SelectQuote raised $360m at a $3.25b valuation at IPO. The company said the virus outbreak is accelerating the digitization of the insurance industry. Read more

Select Financings

Apollo Agriculture - Kenya based agriculture financing platform raised $6m in Series A funding led by Anthemis. Read more

Aspiration - Los Angeles based ESG challenger bank raised $135m in Series C funding led by Alpha Edison. Read more

Brex - San Francisco based credit card for startups raised $150m in a Series C extension led by DST Global and Lone Pine Capital. Read more

Coalition - San Francisco based cybersecurity insurance startup raised $90m in Series C funding led by Valor Equity Partners at a $800m pre-money valuation. Read more

Human Interest - San Francisco based 401(k) provider for SMBs raised $10m in a Series C extension led by Glynn Capital. Read more

Khatabook - India based digital bookkeeping and payments startup raised $60m in Series B funding led by B Capital. Read more

Lingxi - China based machine intelligence for financial services raised $6.2m in Series A funding co-led by ByteDance and Rocket Internet. Read more

Spruce - New York based digital real estate closing and communications platform raised $29m in growth capital led by Scale Venture Partners. Read more

States Title - San Francisco based digital mortgage platform raised $123m in a Series C round of funding led by Greenspring Associates. Read more


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