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In the evening light of a catered party around a pool at a golf resort, a young man in a tracksuit walks around pitching a blockchain play that involves “an asset that isn’t crypto,” while an older guy in a natty blazer asks two dudes in fleece vests why he would ever put money into a “tech growth play” now?
Elsewhere, two kids in their mid-twenties wonder aloud if it will be hard to get family offices to listen to a classic play like their home equity investment product, while across the pool a young woman seems to answer their question by announcing to a small group of middle-aged men in tie-free suits that she is “building a metaverse for family offices to buy NFTs on the blockchain.”
Welcome back to Miami and real-life financial conferences, where even financiers are just happy to be back amongst other people.
Almost two years after in-person events disappeared seemingly overnight during the pandemic, the people who manage wealth and the people that want their wealth managed are back in South Florida for the last week of January, or as those descending on the area call it “Hedge Fund Week.”
At the Context Summit, a three-day confab at a golf resort northeast of the beach, and the iConnections Global Atls conference on South Beach, allocators like family offices meet with fund managers and other investment professionals to see where they want to park some of their money for at least the near future. They pitch ideas, listen, hobnob, and gossip, all to get a sense of what’s popular and where the “smart money” might be moving.
Since they were last together like this, they’ve seen on of the biggest stock market crashes and fastest recoveries ever, very real political upheaval, unprecedented central banking accommodation, and insurgent retail traders creating meme stocks and the rebirth of crypto, so one would think that wealth would be looking to park itself somewhere safe.
But with interest rates now set to rise, inflation soaring, the retail trading boom fading as fast as it began, and a stock market that no one here appears to really trust plummeting back into correction territory, the vibe in Miami is the direct opposite of “back to basics.”
“Two years ago, the last time we met in person, the hedge fund industry was kind of down a little bit,” says Eric Noll, the chief executive of Context. “Equity markets went up every day, so all I needed to do was put my money in an index fund. That’s over and the alternative investment funds are stepping in to show them the bleeding edge of what they can do.”
That dynamic is evident at Context, where it’s hard to find a screen showing equities markets or even overhear a chat about the stock market at all. Along with SPACs and growth stocks, the equity market market is not a hot topic.
What you do see and hear are conversations about NFTs, blockchain, some crypto, a lot of cannabis, and anyone talking about some novel idea around oil pricing can assume they will feel pretty popular.
“If you’re a family office, and you know what you’re doing, you’re looking around and realizing it’s time to re-park the car,” muses one money manager drinking a cocktail at a belly bar while a cover band plays Gloria Estefan across the pool. “Things are about to be very different, and you want to be invested in something very different.”
The definition of a family office has changed quite a bit in recent years, as some have grown to enormous size and several successful hedge funds have shuttered to outside money and declared themselves to be a family office. But the goals of all family offices remain – at their essence – the same; create generational wealth from their existing pool of wealth.
“I’m interested in a lot of stuff people are talking about,” explains one family office manager who puts his age at “very recent college grad” but also says that he “used to do the [venture capital] thing.”
“The metaverse and crypto stuff is really intriguing, and that’s where I want to get us, even if it means we need to unload some of the old stuff,” that he later identifies as an investment in long-short hedge funds. “I want us to have something no one has yet, to me that’s value in this environment.”
For investors like these, NFTs have a special luster. Not only are they outside the reach of inflation, stock market “Apes,” and the understanding of their parents, but they are also unique and exclusive and therefore tickle the same itch that people get from buying a limited-run sneaker or handmade wallpaper.
Except they’re now being sold an entire asset class that is the hot new thing.
“We’re in the fashion industry,” says one fund manager looking around the crowded lobby of iConnections. “Which is fine, if we think we’re making quality fashion.”
“The metaverse is where it’s all going to happen, it’s where people want to be,” explains the young woman from the pool. “I am working with the best creators and blockchains on my NFTs and I have very high-wealth people who are already on board. I’m already in the future.”
She also audibly wonders if anyone has “any shrooms.”
But tripping or not, she might just be in the future. A quick glance at the speaking agendas for Context reveals that crypto, space, private credit, and sports are ruling the days.
“We had a very well-known hedge fund manager, a long-short guy, in New York offer to come down here and do a fireside chat,” says Noll. “We asked around from the attendees on what they’d want him to talk about, and they didn’t have anything.”
That fund manager is not in attendance, but there are numerous speakers on crypto platforming, crypto custody, metaverse building, and gaming. During Monday’s session, the only macro view is a sobering one from hedge fund legend Marc Lasry who warns about how long inflation will be around and sardonically celebrates a break from being pitched on investments that required quadruple leverage.
Deals come from these speakers and conversations, and the conversations are ongoing in hundreds of official – and even more unofficial – breakout sessions across the events, and the hunger is wide.
A quick run-in with the twenty-something home equity guys at yet another poolside cocktail event yields news that they had a successful day of meetings and have some excitement about getting allocations, and Lasry’s mention of a credit venture play raises a lot of interested eyebrows.
“There’s a mistrust of the markets,” says Noll. “That creates a dynamic where you might be interested in an NFT fund or a cannabis fund, because it gets me away from this market.”
When reminded that the S&P 500
SPX,
fell into correction territory during Monday’s trading day, one allocator who was high on the metaverse earlier in the day rolls his eyes and blames inflation.
“I don’t care about the market anymore,” he moans. “I spoke to some guys who have an incredible idea about leveraging European oil fields after lunch. Now there’s a hedge for my Web 3 investments.”
