What do Tom Brady, Alex Morgan and Tobias Harris have in common? And what is the future of asset diversification?
The answer to both questions is simple: Alt.
As in Alt, the startup that wants to “transform investing by unlocking the value of alternative assets.”
Right now, it’s transforming the sports card market, having raised just over $300 million in the last two years from VCs, an alternative investment advisory firm (Atalya Capital), angel investors, and professional athletes like those mentioned above.
“I’ve always invested in alternative things,” says Alt founder and CEO Leore Avidar. He considers his other startup Lob (providing direct mail and address verification API) as one of his alternative asset investments, and Crunchbase reveals at least 9 more of his many private equity investments. Avidar also mentions that he has been investing in crypto since 2014 and started investing in sports cards in 2016, “when my dad sent me a box of cards.”
This experience with alternative assets led to Avidar’s realization that they are not considered by financial institutions as secured collateral for traditional loans. Will he be able to change it by establishing a financial institution, an infrastructure for alternative assets that will make them more liquid, transparent, tradable?
Alt tells you how much the card you want to sell or buy is worth, based on recent transactions and other data it collects from relevant sources. When we spoke, Avidar showed me a card that was being offered for sale on eBay for $250,000 but was worth just $37,000 according to Alt’s estimate.
Alt also provides a free escrow service, protects sellers and buyers from fraud, and charges 1.5% on transactions. It also allows its customers to apply for loans based on their balances. But for Avidar, providing a transparent and well-organized marketplace for a $15 billion market is just “a proof of concept.” The long-term goal is much broader: “If we do it for one asset class, we can do it for many more asset classes. We should be good for any type of alternative asset, whether physical or digital.”
His big ambition is for Alt to become a private equity exchange, as “corporate-backed private equity needs to be disrupted. Private equity is all locked up, people are waiting for companies to go public, there’s no pre-public liquidity market, no one has tackled it because it’s so complicated.”
Why not do it now? “The way to build a really great business is to stay focused. Until we’re number one in trading cards, we’re not moving on to anything else,” explains Avidar.
In 2021, alternative asset fundraising, including private equity, real estate, infrastructure, private debt and natural resources, exceeded $1.1 trillion and total assets under management exceeded $9 trillion, according to the management outlook of Moody’s 2022 assets.
In the near future, alternative assets may play a much larger role in investment portfolios than they do today.
Apollo Global Management CEO Marc Rowan predicted in a recent earnings call that individual investors will need to sharply increase their allocation to private markets to meet their savings needs. “I could see a day in the not-too-distant future when a client’s portfolio is not 10% or 15% alternatives, but 50% alternatives,” Rowan said.
Currently, only 1% to 2% of the estimated $80 trillion held by individual investors worldwide is allocated to alternative investments, according to PitchBook Data Inc. the simultaneous decline in the value of both stocks and bonds.
This shift is already happening in the investment portfolios of public pension funds that are taking on more investment risk to meet their future obligations. Alternative assets now make up 24% of public pension fund portfolios, according to the most recent data from the Boston College Center for Retirement Research. This is up from 8% in 2001.
“I have a 10-year time horizon, we plan to make it really long,” says Avidar.