Alternative Investing Report - September 3, 2024

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A big talking point in the investing world for the past week has been a Biden administration plan to tax unrealized capital gains. Though it is not her proposal, Vice President Harris has endorsed it, leading many to tie it to her as she runs for President. Unrealized gains occur when assets rise in value, so the gains are on paper only. Historically, gains are only taxed when gains are “realized” because an asset is sold. The new proposal to levy taxes on unrealized gains is limited in scope. It would apply to individuals with at least $100 million in wealth and at least 80% of their holdings in “tradeable assets,” and who do not already pay at least a 25% tax rate on their income.

➨ TAKEAWAY: Because of the $100 million threshold, this proposal would initially impact a very small percentage of investors. Because of the emphasis on “tradeable assets,” most startup founders and investors, who deal principally in illiquid securities, would not be affected. The provision could factor in deciding whether to take a company public, but it seems unlikely that it would stifle entrepreneurship. Critics focus on the potential that, like other historical taxes, it would ultimately be applied more broadly. Ultimately, the unrealized gains proposal is unlikely to ever become law, and if it does, its effects will be far less than many are suggesting.

The U.S data center market has doubled in size in the last four years, and its vacancy rate just hit a record-low 3%. The U.S. is now home to more than 2,800 data centers, seven times more than any other country, and values have been rising quickly for land that can support data center construction.

➨ TAKEAWAY: Within the struggling commercial real estate world, the industrial sector has been a bright point the past few years, with data centers leading the way. Even though construction has increased sevenfold in the past two years, the rapid growth of the AI industry seems to ensure that there will be no slowdown in demand.

In this episode of Smart Humans, Slava Rubin talks with SafeGraph CEO Auren Hoffman about angel investing, venture capital, and how he invests into data businesses.

💵 Private credit fund performance: Global private credit funds averaged a 9.2% return in 2023, with direct lending returning 11.1% and mezzanine funds leading the way with a robust 24.5% return.

🪙 Crypto bill in 2024?: Despite growing support from lawmakers across the aisle, legislation on cryptocurrency is unlikely to pass Congress this year, though there is optimism that it could happen in 2025.

🎨 Rembrandt in the attic: “Portrait of a Girl,” a painting by the Dutch master that was found in an attic in Maine, just sold for $1.17 million at auction.

🚀 Robot Ventures raise: The crypto-focused VC firm announced a new $75 million fund that will invest into early-stage companies, as crypto venture investing continues to rebound.

🚘 Monterey Car Week recap: Auction sales at last month’s event were well below expectations, particularly for cars valued above $1 million, and potential reasons include a general price correction, geopolitical tensions and election year uncertainty.

Houses on Lombard Street in San Francisco, known as the “crookedest street in the world,” rarely come onto the market. Though this property has been used as a single-family house, there are two separate units and a garden apartment, along with a backyard complete with a Redwood tree. It’s listed at $5.25 million, and comes with a spectacular view of Alcatraz, but be warned - the street is usually packed with tourists.