Two years ago, we used the Paris Summer Olympics as an opportunity to examine performance across alternative markets in Western Europe. Today, given the recently completed Winter Games in Milan, we turn our attention from the athletes’ medal counts to the recent movements in the precious metals market and how they may impact private investment.
We’ve also charted fundraising numbers by vintage year for Natural Resources funds in Cobalt since the start of the century.
The precious metals market has experienced some abnormal volatility recently. Gold was up 40% from August to the beginning of February, peaking above $5,000 for the first time. Silver followed suit, up over 100% before a one-day 30% correction shook the market. It was a needed cool-down, but the rise in metals over the past year signals investors’ flight from safe-haven assets and a weakening U.S. dollar.
However, you would not have been able to predict that rise by analyzing the Natural Resources chart above. After bottoming out in 2020, investing in private assets in this market was steady but subdued throughout the decade. Given Natural Resources also encompasses forestry, agriculture, and oil & gas, it isn’t an exact 1:1 for precious metals. However, it does show demand for these assets had been felt less in private markets over the past half decade.
Going back further, we see Natural Resources as a strong market throughout the 2010s coming out of the Financial Crisis. Among the largest funds in this strategy, 6 of the 10 were raised from 2012-2018. That signaled a period of high demand, with the large firms ready to deploy the record amounts raised.
Fundraising has not yet recovered to the levels of the 2010s, as noted above. However, as the metals market strengthens and reaches a more historically consistent level, we may see investors come back to the GPs in Natural Resources ready to invest in the levels from the previous decades again.
As mentioned, Natural Resources do cover oil & gas as well. While prices have been moving in a different direction from metals recently, the geopolitical climate that turned investors back toward safe-haven investments impacts this market as well. We could see an increase in investment here as these impacts take shape in the back half of the 2020s.
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