Archean Capital Closes Fund II Over $425 Million Read
Archean announced the close of Archean Capital Fund II, L.P. at over $425 million. “The Archean team has built something special,” said Tadd Wessel, the Founder and Managing Partner of Petrichor Healthcare Capital Management. “Archean has been a key partner in our success. The anchor commitment to our fund enabled immediate new investments and their strategic advice has been invaluable. I could not be more excited for the platform they are building and their future.”View Full Article
I think that you will all agree that we are living in most interesting times. I never remember myself a time in which our history was so full, in which day by day brought us new objects of interest, and, let me say also, new objects for anxiety. (Joseph Chamberlain, British statesman, 1898)
How was the quarter? : The rollout of COVID-19 vaccines, continuing large-scale fiscal stimulus, and central banks’ highly accommodative monetary policies have bolstered investors’ confidence in a rapid economic recovery and led to market gains. There was some rotation away from 2020 winners like tech into value and small cap stocks. As evidence of this new twist, the tech-heavy NASDAQ 100 only returned 1.8% while the Dow Jones Industrials, dividend stocks (Vanguard High Dividend Stock ETF) and small cap stocks (Russell 2000) earned 8.5%, 11.2% and 12.7%, respectively.
Objects of interest: SPACs, Reddit, Robinhood, GameStop, Bitcoin and Archegos all made for captivating headlines. Economically speaking, the March jobs report blew past expectations as payrolls rose by 916,000, while the latest report on U.S. manufacturing gave the highest reading since 1983. GDP is closing in on its pre-pandemic high and growth is expected to exceed 6% in 2021, while corporate profits are set to rise more than 20%. Consumers, who have been biding their time during the pandemic, have accumulated excess savings of an estimated $1.5 trillion that could release a wave of pent-up demand later this year. If air travel is any indication, in March 2021 the TSA screened the highest number of passengers in a single day since March 2020.
Objects of anxiety: One object of anxiety is not new – recent market exuberance. There are legitimate questions regarding whether it has been rational or irrational. The market’s recovery since last year is supported by the factors mentioned above. However, other metrics such as the cyclically adjusted PE ratio (CAPE) and the Buffett Indicator (market value to GDP) show the S&P 500 at levels equal to or exceeding those of the tech bubble. A second and newer object of anxiety is inflation. With massive government stimulus, easy monetary policies, and substantial economic growth, the prospect of higher inflation is rising. Unchecked inflation erodes purchasing power and leads to countermeasures that can be recessionary.
What to do?: Investors should gird for a more challenging year ahead, while acknowledging that asset price cycles are inevitable. In fixed income, investors should consider keeping duration at the low end of target ranges and holding some inflation-protected bonds. On the equity side, one should balance growth with value and consider commodity-based equities, liquid alternatives, and private equity to sidestep any potential short-term speed bumps.
Intermediate and long-term interest rates continued to rise over the month with 5+ year Treasury yields increasing 21-34 basis points, further steepening the yield curve which saw the short-end virtually unchanged once again. March marked the second consecutive monthly increase of at least 25 basis points for the 2-year and 10-year Treasury yield spread, which now stands at 158 basis points, the largest since July 2015. The rate rise narrative was……View Full Article