Kevin T. Carter

New or smaller VC, PE or HF manager? AUM less than $50 million? Great Performance? Trying to raise assets? Struggling and failing?   Sounds all too familiar: It’s due to poor or non-existent marketing Let’s get real about raising assets for “sub-institutional” managers, those with AUM between $0 and $50 million. IT’S HARD AND A STRUGGLE.   Raising assets in a crowded, hyper-competitive, complex and complicated market from investors that are risk averse, stringently selective and idiosyncratically demanding is more challenging and difficult than most new and sub-institutional managers understand. The fact is the majority of sub-institutional managers fail to get AUM beyond personal capital long with small amounts from family and friends even when they have exceptional performance. Plainly speaking: There is a lot of BS, hype, propaganda and completely wrong information about marketing and fundraising for small managers with AUM less than $50 million Since 2011, Johnson & Company has specialized in meeting the marketing challenges for "sub-institutional" managers. 25+ years experience, expertise and skill uniquely equips a new or smaller manager with the FACTS and proven structured, disciplined and focused PROCESS supported by independent high-integrity data and research, accurate information, objective insight, expert instruction and frontline intelligence that optimizes marketing process execution to maximize the success, efficiency, economy, expedience and effectiveness of raising assets. If you’re a new or smaller manager, with AUM less than $50 million struggling and failing to raise assets, first get the facts: https://johnsn.com/facts If after your review of the “FACTS”, you’d like a candid, no-nonsense conversation about marketing and raising assets, contact me, I welcome the opportunity. bryan@johnsn.com

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The Machine is Working Well The CLO machine is cranking out deal flow at a steady pace that is well ahead of 2023. CLO global new issue volume will likely exceed $225B (~$180B through Q3/’24), which is well above $144B issued in 2023. AAAs are trading at their tightest spreads of the year, and this not only includes BSL, but also privately issued loans. CLO issuance in the U.S. has been running at a pace of ~4x the issuance in Europe. There are ~100 credit managers issuing CLOs in U.S. market and ~50 managing CLOs in Europe. The CLO market is open for business. CLO managers are evaluating >600B+ originally issued in 2018-2023 to assess the value-add of a potential 5-year additional maturity reset with added potential to tighten spreads on their liabilities which can be a big boost for CLO equity returns. Looking forward, the next vintage of CLO deals looks favorable as expectations for improving credit metrics will likely result in lower default rates in the next 2 years compared with the past two years. The CLO machine is working well, cranking out deals as AAA-BB tranches are performing strongly, while the Equity tranche is generating impressive cash flow.

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Labor Market Soft Landing Progressing, but Not Complete ◾ Payrolls & Unemployment Up in Parallel. This labor market continues to follow the soft landing blueprint by the book so far. Nonfarm payroll employment increased 272k in May vs. 180k consensus (plus -15k revisions to prior months). Although the unemployment rate ticked modestly higher to 4%, it remains well near historical lows while the labor market comes into greater balance (job openings counts converging with job seekers). ◾ Wage Growth Not Yet Slowing. It’s clear now that calls for disinflating wage growth were too early. Average hourly earnings growth ticked up to 0.4% on a month-over-month basis, which is the largest increase since January. This will be a closely watched development since wages are a key cost input for services, which remain the stickiest part of the CPI basket holding the Fed back from cutting rates. ◾ Making Sense of the Disparity. Why the disparity between payrolls and unemployment? For one, they are outputs of two different surveys. The household survey that drives unemployment includes farm workers, some that are self-employed and other private household workers. Those are not included in the establishment survey for nonfarm payrolls, which also has a statistical error rate that is 4x times higher than the household survey, hence some of the large revisions often seen after the fact. Altogether, the unemployment rate is probably the more reliable indicator to follow. ◾ Fed Reaction Function. On net, today’s jobs report was hotter than expected with payrolls and wages above expectations but offset on the margin by a higher unemployment rate. This probably doesn’t change the Fed’s decision process that likely sees rates on hold again at next week’s FOMC, but it is roughly consistent with a path toward rate cuts beginning in the fall.

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What's the best time to extend duration when rates start to come down and curves start to "disinvert"? Should you "T-bill and chill" until the central bank pulls the trigger and starts cutting, or is the juice all squeezed out of longer yields at that point? It’s a relevant question as more and more central banks start cutting rates, particularly for economies such as Iceland where policy rates are probably some distance above neutral. Thankfully, there’s a highly relevant and recent case study. A group of mostly EM economies with a thorny inflation history hiked rates early and fast in 2021, which helped bring inflation under control fairly quickly and allowed for rate cuts as early as last summer. I tried to search for clues based on the experience of these EM early hikers in a note to clients earlier this week (see link for a great summary by the editor of Innherji Hörður Ægisson: https://lnkd.in/ggNiP9sV). The average policy rate in these economies rose by 960bps, but has been cut by 290bps since last summer. During that period, 10Y yields rose on average 630bps, but have since rallied by 210bps. In other words, there is pretty strong transmission up the curve from the policy rate, leaving some interesting ways to play duration… which just leaves the question of timing. Here’s where things get interesting: On average, most of the rally in longer term yields takes place in around 300 trading sessions *before* the first cut. So far, there has been very little tightening of long yields *after* rate cuts commence. In other words, the rally tends to be driven by the end of hiking cycles, more than by the start of cutting cycles – when the cuts finally start, chances are there’s not a whole lot of juice left in longer term yields. Of course there’s no guarantee this pattern will be repeated, but it does support my gut feeling that the way to play policy normalisation is to be fairly discerning about placement on the curve, rather than blindly loading up on duration (even more so in markets where term premia have been eviscerated by QE).

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👨‍💼 Labor Market Normalization, Not Deterioration 👩‍🏭 🧹 Shaking the Dust Off Jobs Figures. The November jobs report is the first clean signal on the health of the labor market following material hurricane and labor strike disruptions, and the broader picture is continued and healthy normalization. Nonfarm payrolls grew +227k vs. +200k consensus (with +56k revisions to prior months) and the unemployment rate ticked slightly higher to 4.2%. ➡️ Normalization, Not Deterioration. There’s a fine line between normalization and deterioration in the labor market, but the U.S. still appears to be following the normalization path. The jobless rate is bouncing around the low-4% range, which is roughly consistent with the natural rate of unemployment – that is, the baseline level of joblessness that persists in a well-functioning economy due to frictional and structural factors. Sub-4% unemployment was not sustainable over the long-term, but the low-to-mid 4% range could be a level unemployment sits at for some time in a steady-state, late-stage expansion. 🔭 On the Lookout for Deterioration. More so than usual, investors should be on watch for where the labor market goes from here. The number of employed persons from the household survey is now down almost 0.5% from its all-time peak, which is historically consistent with mid-cycle adjustments. It usually takes employment drawdowns of 1% or more to signal imminent recession in the U.S., suggesting that investors should keep their ears close to the ground on the state of the labor market. ✂️ Fed Reaction Function. The unemployment rate’s negative tilt may help make a firmer case for a 25bp cut from the Fed this month. There is still another CPI print before the FOMC meets that could upend that thought process, especially if it reinforces some nascent sticky services inflation trends. Altogether, the real fed funds rate is still relatively tight, and maintaining that posture runs the risk of the labor market’s normalization trend turning to deterioration. Expect the Fed to continue on its gradual pace of easing into the new year as it tries to keep both sides of its dual mandate in balance.

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Retail investors are piling into leveraged ETFs: always when markets are at all-time highs (and it never ends well...) "Retail investors snap up triple-leveraged US equity ETFs" https://lnkd.in/d5qdVjaj

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Out of complete necessity, I will host another CollinsCast 10/23 at 5pm ET to discuss $TSLA EPS before the mgmt call begins at 5:30pm. Video call link: https://lnkd.in/eEErpw_7 Or dial: ‪(US) +1 402-732-7305‬ PIN: ‪403 326 826‬# I have never seen a more confused bunch of "analysts." $TSLA is going to market with a 7.25 year-old (3) and 4.5 year-old (Y) product lineup. Old product requires discounting, and that pressures profit margins. Full stop. That is why $TSLA earnings have been consistently mediocre and margin pressure at what was proclaimed by nitwits--as recently as 12 months ago--as "the most profitable automaker in the world" is incessant. As shown in the chart below, $TSLA has LOST $550 BILLION in market cap in the past 2.75 years, which is an extraordinary diminution in value. And if you compare RELATIVE performance vs., for instance, $NVDA, or even $AAPL, which pays a dividend (something TSLA has never done,) $TSLA stock has been an absolute disaster since the beginning of 2022. But Wall Street hides that. Tomorrow, I will explain why. Join the CollinsCast.

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Türkiye’s pivot musings: => Türkiye’s manufacturing PMI dropped to the post-pandemic low in September - yet another sign (alongside positive net reserves, improving external balances, lower gold imports and FX-protected deposits) that the policy U-turn is working as intended. => But is it enough for a monetary policy pivot and a rate cut already this year? A lot will depend on the central bank’s ability to meet its year-end inflation target of 38%. Quick calculations show that for this to happen, monthly CPI should average 1.15% or less in September/December. The September print (on Thursday) will show whether this is feasible.

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More on PE/VC performance (first part on returns is here: https://lnkd.in/g5iyC3-q) In VC-land, 5% of GPs account for 50%+ of venture gains: again, there is a significant upside skew, but dispersion of returns is massive. 

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📈🏢 Aby Rosen's RFR Holding is facing a staggering $2.5B debt bill as defaults pile up! 💥 🔎 According to a recent Bisnow article, RFR Holding, a prominent NYC real estate firm, is grappling with mounting debt and defaults. The company, led by billionaire Aby Rosen, has a portfolio of high-profile properties, including the iconic Seagram Building and Lever House. 🏢🏦 📊 The firm's debt load has surged to a whopping $2.5B, with $1.1B in loans maturing this year alone. 💸 The pandemic has hit the commercial real estate market hard, causing defaults to skyrocket. RFR Holding is no exception, with defaults on several properties, including the $200M mortgage on the Seagram Building. 📉 🗣️ "The pandemic has created a perfect storm for commercial real estate," said one industry expert. "Companies like RFR Holding are facing unprecedented challenges as they navigate this difficult time." 🌪️ 🔜 So, what's next for RFR Holding? The company is reportedly exploring options to refinance its debt and avoid further defaults. 💡 With the commercial real estate market showing signs of recovery, there's hope that RFR Holding can weather this storm. 🌞 Stay tuned for more updates on this developing story! 📰🔔 #RFRHolding #CommercialRealEstate #Debt #Defaults #NYCRealEstate

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My latest Substack post analyzes $XOM once again catching $TSLA in terms of market cap. Last 5 qtrs: $XOM returned ~$40bb to shareholders via divvies, buybacks. $TSLA: $0.00 That is what really matters. But the key to investing is the second derivative, and as EV sales slow (good for demand for oil, obvs, and for $XOM) I fail to see the Silver Bullet for $TSLA. Why? Because Elon let his product line get old. No amount of robotaxi/FSD necromancy is going to change that. Trade accordingly. Excelsior! --Jim

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There are still non-believers, but: Real GDP grew at an annualized rate of 2.8% in Q2, surpassing the consensus estimate of 2.0%. This marks an acceleration from the 1.4% growth rate in the previous quarter, driven by increased consumer spending and inventory restocking. Additionally, capital expenditures and government spending rose. However, these gains were partially offset by a decline in residential investment and a widening trade gap. (Source: Ned Davis Research) It is the law of large numbers after all: More Americans are driving uninsured, pushing up insurance costs for everyone. Since the pandemic, the percentage of uninsured drivers rose from 11% in 2019 to 14% in 2022, with the trend continuing. High rates of uninsured motorists are seen in Washington, D.C., New Mexico, and Mississippi. As more people drop coverage, insurers are increasing premiums, leading to a 12% rise in the average annual cost of full-coverage car insurance, now $2,278, according to Bankrate. (Source: Wall Street Journal)

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YOU CAN'T FIGHT THE FED - BUT YOU DON'T HAVE TO LISTEN EITHER The Fed spoke yesterday, putting the no-hikes scenario is firmly on the table. But it's changed direction too often lately. It is clear, that the FOMC is NOT ahead of the curve. For that, look to Janet Yellen. My full interview at Bloomberg News #markets #Fed #interestrates #economy https://lnkd.in/d2cAzQhV

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As the market changes, its breadth plays a large role in investment performance. Recently, I've been analyzing the rolling returns of VFV (S&P 500 Index ETF, blue) versus EQL (Equal Weight S&P 500 ETF, red), and the insights are telling. The below chart is interesting as I’m looking at rolling returns over 12-month periods. There are clear periods where one ETF outperforms the other and periods where they are very close in performance.    When VFV outperforms EQL, it's often a sign of narrow market breadth, with a few mega-cap stocks driving the bulk of returns. This environment tends to favor passive strategies tied to cap-weighted indices. When EQL takes the lead, market participation broadens, and opportunities for active managers expand. A broader market allows stock pickers to uncover mispriced assets and generate alpha. You can see the two converging after periods of VFV outperformance. Historically, these periods of EQL outperformance have aligned with moments where active managers have added value. I applied this to the S&P 500, which is historically one of the most difficult benchmarks to beat. It’s also something to consider in less efficient areas of the market. Active management is never easy, but there are times when the market might cooperate a little bit more. What does that mean for investors? I think it means using a combination of well-thought-active and passive managers like allocating to managers with differing styles. #ActiveManagement #MarketBreadth #InvestmentStrategy #PortfolioManagement 

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Fake jobs, fake clients, fake names, and fake firms, I am half shocked, half not. A lot of the time when a firm presents "market mapping" or "intel", this is how they get the data. Whether its a crime or not, this is a massive breach of trust, especially in a business where trust, discretion, and reputation are so important. I get asked a lot by candidates to ensure discretion, which we have always made paramount, and this is why. Sadly, it taints our professions name. I founded H-Squared as I didn't like the traditional model, one size does not fit all, and you can deliver the high level of service without compromising on quality, and in this case, morals.

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New or smaller VC, PE or HF manager? AUM less than $50 million? Great Performance? Trying to raise assets? Struggling and failing?   WHY? = Poor or non-existent MARKETING PROCESS. see the data!   Despite what many new and smaller managers FIRMLY believe “performance” does not raise assets, it merely brings a degree of attention.   If it were true that “performance” was the catalyst to raise assets, many smaller managers would have little difficulty growing AUM.   Raising assets is about three (3) critical components: PEOPLE, RELATIONSHIPS & TRUST.   In fact, research shows that of the 3, "TRUST" is THE key to raise assets.   TRUST > TRADE/TRANSACTION.   This is particularly true in the current climate of “low-trust”: Investors are risk averse, stringently selective and idiosyncratically demanding.   In such an environment, raising assets is more challenging and difficult than most new and smaller sub-institutional understand. It's often only after a long period of trying to raise assets from performance with little success, that many come to realize the allocation decision by an investor is about much more than investment performance alone.   “Pitching & Posting” (performance + content) does not build TRUST. The truth is those activities undermine TRUST and do not help build relationships: NO ONE WANTS TO HEAR A “PITCH” and few read content.   With investors that are inundated with content on a daily basis, hyper-skeptical and highly-informed with access to better information to make allocation decisions, it takes a consistently “well-executed” “investor-centric” structured, focused and disciplined MARKETING PROCESS to raise assets.   However, 81% of new and smaller managers do not have a marketing process.   The lack of marketing process in the hedge fund space results in:   A. 89% NEVER reach $100 million AUM B. 76.4% ‘tap out’ their investor network within 1 year C. +50% close within 3 years of launch.   Simple: “NO MARKETING PROCESS” = “”NO SUCCESS RAISING ASSETS”. Since 2011, Johnson & Company has specialized in marketing process development and execution for "sub-institutional" managers, those with AUM less than $50 million. 25 years experience, expertise and skill uniquely equips a new or smaller manager with the information, insight, instruction and intelligence that optimizes marketing process execution to maximize the success, efficiency, economy, expedience and effectiveness of raising assets. There is a lot of BS, hype and completely wrong information about marketing and fundraising for managers with less than $50 million AUM. For smaller managers to succeed raising assets, it's mandatory to get beyond all that and get the "FACTS" and "DATA". If you’re a new or smaller manager struggling and failing to raise assets, get the "FACTS" and "DATA" here: https://johnsn.com/facts After that, if you’d like a candid, no-nonsense conversation about marketing and raising assets, contact me I welcome the opportunity. bryan@johnsn.com

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🌬️Tailwinds for crypto assets? Understanding the impact of mid-cycle versus recessionary Fed rate cut regimes is crucial in shaping expectations for risk-on extrinsic asset valuations, particularly in the realms of AI and crypto. During a mid-cycle easing regime, financial conditions are expected to remain accommodative or even ease, contrasting with an outright recession scenario. With the Fed preparing for a cut later this month, the former scenario is deemed more probable. According to insights from Gemini, historical data indicates that this environment serves as a significant tailwind for crypto assets. Understanding these nuances can provide valuable insights for investors navigating the evolving landscape of digital assets.

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Raising Assets: THE critical objective for new & smaller VC, PE & HF managers. Most struggle and fail despite "performance"+ an exceptional track record. WHY? = MARKETING.   There are thousands of venture, private equity and hedge funds in active fundraising + investors are risk-averse, highly skeptical, stringently selective and uniquely demanding.   New and smaller managers must be completely prepared for marketing in a hyper-competitive, crowded and complex fundraising climate.    Success raising assets depends on the marketing process.   However, "81% of smaller managers do not have a marketing process".   The requirements of marketing are misunderstood and under-estimated by almost all new and smaller managers.   1. The marketing process for "sub-institutional" managers is completely different than for larger, "more-seasoned" "institutional" funds.   2. “Pitching”, “Posting”, “Parties (conferences)” & "Performance" don’t raise assets for new and smaller managers.   3. There's a lot of BS, scams and wrong information about raising assets for new and smaller managers.   Since 2011, Johnson & Company has specialized in marketing for new and smaller managers with AUM less than $50 million.   “MARKETING ALPHA BRIEFINGS”: A “1-on-1 intensive process” for managers with AUM considerably less than $50 million to implement the structured, disciplined and focused “manager-specific marketing process" that drives consistent “step-by-step” “high-impact” "investor-centric/prospect-specific” engagement with experienced assisted execution, expert guidance and the personal instruction that raises assets efficiently, economically & expediently.   Key Briefing Process Components:   ✅ 12 weeks 1-on-1 Marketing/Fundraising Sessions. ✅ 7 day/week "On-Call" Marketing/Fundraising Guidance. ✅ "Step-By-Step" Assisted Marketing/Fundraising Execution.   On-Site "Briefing Topics":   1. The “6-Steps” of the Allocation Pathway. 2. DON'T "PITCH"="PRESENT!" = Know the CLIMATE.Understand CONTEXT. 3. Prospect Engagement: "INVESTOR-CENTRIC" + "PROSPECT-SPECIFIC". 4. Building The "Pipeline": What's YOUR Profile? 5. Avoiding the "Field of Dreams": "If YOU build it; THEY won't come!" 6. 3rd Party Marketing: Placement Agents - The mystery for smaller managers. 7. 4Q Profiling: Organically build relationships to raise assets. 8. Databases and Platforms: "Post & Hope"!? 9. ODD-Ready! Your Operational Blueprint. 10. Collateral/Content/Conversations: One size doesn't fit all! 11. EQ>IQ: Connect to Build Trusted Relationships & Actionable Conviction. 12. CON'D?! "CON"ferences stop wasting your time and $$$! 13. De-CAPitated!: Working with prime broker cap intro. 14. Consultants & Gatekeepers: Allies? Advocates? Adversaries? 15. Family Offices: Getting The Trusted Introduction. 16. Seeding, Incubators & First-Loss Capital: Real? Hype?! 17. LIGHTS! CAMERA! ASSETS?!: Using social media. 18. NO FREE LUNCH: Take $$ to raise assets.   FOR DETAILS: https://lnkd.in/gRetGVzA

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