In the ever-evolving landscape of global industries, healthcare is a beacon of challenge and change, promising an unparalleled impact on society. This narrative delves into the transformative journey of a serial entrepreneur who ventured from the dynamic realms of startups across various sectors to the intricate and impactful world of healthcare.
The Genesis: A Foundation in Innovation The journey of an entrepreneur is inherently one of innovation and adaptation, starting with an idea that challenges the status quo. Our protagonist began their entrepreneurial career with ventures that spanned technology, e-commerce, and sustainability, each enterprise laying the groundwork for critical skills in innovation, problem-solving, and scalability. These ventures were not just businesses; they were learning platforms that prepared them for the complexities of healthcare. A Pivot to Purpose: Entering the Healthcare Arena A confluence of personal insight and professional aspiration sparked the pivot towards healthcare. For many entrepreneurs, such a shift is precipitated by a personal encounter with the healthcare system—a challenge faced by a loved one or an individual health journey. This was the catalyst for our entrepreneur, who saw healthcare as a sector ripe for innovation and a calling to contribute to societal well-being. Transitioning into healthcare requires a fundamental shift in approach. Beyond the commercial and technological considerations, there’s a moral and ethical dimension unique to this field. Our entrepreneur embarked on this path with a vision to bridge the gap between technological innovation and patient-centric care, recognizing the potential to transform lives through better healthcare solutions. Confronting the Healthcare Behemoth: Challenges and Adaptations The move into healthcare entrepreneurship is laden with formidable challenges. Regulatory hurdles, ethical considerations, patient safety, and the intricacy of medical science itself make this field particularly demanding. Unlike other sectors where agility and disruption are often celebrated, healthcare requires a cautious and deliberate approach to innovation. Facing these challenges, our entrepreneur adapted by embracing continuous learning and seeking expertise in biomedical ethics, regulatory affairs, and healthcare management. They understood that to innovate in healthcare, one must navigate its complexities with respect, diligence, and a deep commitment to patient welfare. Collaboration as a Cornerstone: Forging New Pathways in Healthcare A pivotal realization in our entrepreneur's journey was recognizing the power of collaboration in healthcare innovation. Healthcare's multifaceted nature requires a symphony of expertise, from clinical knowledge and patient care practices to technological and business insights. By forging partnerships with medical professionals, researchers, and policymakers, our entrepreneur facilitated a cross-pollination of ideas that led to breakthroughs in patient care and healthcare management. These collaborations were instrumental in developing solutions that were not just technologically advanced but deeply integrated into the healthcare ecosystem, addressing real and pressing needs. Creating Impact: Innovations that Resonate with Real-World Needs A thriving healthcare entrepreneur's hallmark is their innovations' tangible impact on the healthcare system and patient lives. For our entrepreneur, success came from digital health platforms that offered accessible, personalized healthcare services and devices that improved patient monitoring and outcomes. One notable innovation was a digital platform that democratized access to mental health services, supporting individuals in underserved communities. Another venture focused on wearable technology that monitored chronic conditions in real time, enabling proactive healthcare management. The Horizon Ahead: A Continuum of Innovation and Impact The journey of a serial entrepreneur in healthcare is an ongoing saga of exploration, innovation, and impact. For our protagonist, the future is a canvas for leveraging AI, genomics, and personalized medicine advancements to elevate patient care and healthcare efficiency further. This ongoing odyssey is a testament to the resilience, adaptability, and vision required to make a meaningful difference in healthcare. It underscores the transformative potential of entrepreneurial spirit infused with a deep commitment to enhancing health and well-being. A Journey from Entrepreneurial Ventures to Healthcare Vanguard The narrative of transitioning from diverse startups to making significant strides in healthcare illustrates a profound journey of impact and innovation. It highlights the unique challenges and opportunities within the healthcare sector, emphasizing the importance of ethical considerations, collaboration, and patient-centered innovation. For those entrepreneurs drawn to healthcare, the journey is complex but profoundly rewarding, offering the chance to contribute to societal health and well-being in lasting and meaningful ways.
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10/24/2018 0 Comments Investing in the Overseas MarketIt has been a challenging year for investing in foreign markets. Economic growth has diverged between the U.S. and non-U.S. regions and equity markets have followed suit. It has been a challenging year for investing in foreign markets. Economic growth has diverged between the U.S. and non-U.S. regions and equity markets have followed suit. However, the conditions that led to weakness in international markets and strength in the U.S. could well reverse in the latter part of this year. In the U.S., the Federal Reserve is likely to keep raising interest rates, earnings growth is at a peak and market leadership in the tech and consumer discretionary sectors is looking vulnerable. In contrast, beyond U.S. shores, monetary policy remains loose, growth could be stabilizing, and valuations appear more attractive.
Recent weakness in certain foreign markets can provide an opportunity to rebalance your portfolio and avoid being overexposed to late-cycle U.S. markets. Below are three regions that could represent opportunities going forward: Europe – Stocks may have sold off more than financial conditions warrant, creating some compelling opportunities. Investors should look for high-quality, value-oriented Europe sectors with less U.S. exposure, such as financials, utilities and telecom. Japan – Its labor market is seeing the most improvement in decades and business sentiment is up. Corporate profitability and earnings momentum are improving. These conditions may support growth and benefit equities. Emerging Markets – The downturn in currencies and stocks may be overdone. China weakness seems overstated and a rebound once currency and headline fears abate may benefit emerging markets. Investors should stay with export-oriented emerging market countries that are less sensitive to dollar strengthening, such as Russia, Taiwan and Korea. Investors saw very positive results in private markets for FY 2017; the year marked a record year for fundraising in private markets, with over $750 billion globally raised. PE and private debt grew by 11 percent and 10 percent respectively. Most growth derived from funds with AUM of over $5 billion. Notably, ignoring megafunds, the market activity from all other funds decreased. As numbers are finalizing for the year of 2018, investors see funds raised thus far down about 40%, while aggregate capital raised within PE is down about 30%. Overall operating metrics for the industry appear healthy, with dry powder to deal volume at a healthy ratio and stable over time. Interestingly enough, pension funds are increasingly allocating to the asset class year over year, as well as sovereign wealth funds who are becoming more and more important. Investors should see co-investment deals increasing over the next few years.
On overall economic news and activity, it appears as if greater degree of discipline is taking place than during the run up to historic financial crises. Rather than underwriting at any cost and blowing up deal multiples, most of the PE managers are hedging towards multiples contraction. Keith Knutsson of Integrale Advisors commented, “Even if results for FY 2018 might not appear as strong as the previous year, I think the Private Equity market is strong going forward. One thing investors should keep an eye out for is whether the decrease in deal activity continues, and dry powder increases at similar rate.” The argument whether enhanced regulatory oversight by the Consumer Financial Protection Bureau (CFPB) has a significant impact on the supply of credit or on bank-risk taking is a critical topic. With regulatory efforts strengthening across the street, one might assume that the non-agency lending business has been negatively impacted. However, studies from reports showcase that CFPB oversight has at most a small negative effect on overall mortgage lending. According to the research done, an increase in regulatory effort creates an environment where banks decrease origination for riskier loans. That might be the case for riskier loans, but non-qualified mortgage loans are not necessarily considered risky.
The non-qualified mortgage loans of today are nothing like the subprime loans of yesterday. Even with non-QM loans, a lender must follow all requirements and validate the borrower’s “ability-to-repay”. This would mean vetting all the applicants with employment, income and asset verification similar to that of agency loans. Non-QM loans are not as risky because lenders offset some of the risk by charging higher rates and fees as long as they can demonstrate the consumer’s “ability-to-repay” debt. Jumbo mortgages are also affected by an increase in regulatory burden because they fall outside of the QM rule standards and thus don’t fall under the safe harbor, making lenders reluctant to originate them. After examining the regressions, applicant denials and graphical evidence from reports, it is clearly evident that the CFPB oversight has affected the composition and riskiness of bank lending. Keith Knutsson suggests "The 'pendulum' had swayed too far to the radical side of regulation. This has left a gap in the market where worthy loans have been widely ignored by the institutions. Thus proving that heavy regulations have been more of a burden, than a benefit, in the non-QM lending business. This neglect in the industry has created an opportunity for institutions to capitalize on what would normally be healthy loans." Recent research suggests that up to 40 percent of finance activities are able to be fully automated. Functions such as cash disbursement, revenue management, and general accounting and operations are tasks under such review. These abilities would help simplify core internal transactions, standardize reporting structures, and help the hierarchy in terms of efficiency.
In more specifics, groups are already exploring a process called RPA, or robotic process automation, which falls under the category of automation software that performs redundant tasks on a timed basis and ensures. A tool such as RPA has advanced to the point they are no longer utilized in only a specific business activity but throughout multiple areas of the business. Unfortunately, the process of implementing such tools is not always as easy. Companies have to work on successfully implementing RPA at scale, and the ones that have done so had to redesign their operating models and their processes. Finance departments have to receive training on RPA technology to avoid overflow to IT departments. In the corporate world, insiders estimate the overall utility of tools such as RPA to increase overall productivity within the finance function in group by about 20 percent, given time- and cost-savings associated with the deployment of RPA in this pilot area as well as several others. Keith Knutsson of Integrale Advisors commented, “it remains important to specialize new technological abilities we develop into specific departments and functions. In the world of finance, this, in my opinion, is very much needed.” There may already be problems coming up with the Fed’s new strategy to manage the policy rate. By raising the IOER rate, the interest paid on excess reserves, by 20 basis points last week, the Fed assumed that it could put some downward pressure on the effective funds rate pushing toward the middle of the policy target range. This idea worked for a few days, but recently started showing trends of a rising effective funds rate.
Analysts say, “Well it was nice while it lasted. For exactly three days the Fed’s strategy worked as intended, with the effective Fed funds rate trading at 1.90%, which is 20 basis points above the level prevailing before last week’s policy announcement. This week, however, the rate is ticking higher again, printing 1.91% on Tuesday and 1.92% on Wednesday. That’s just 3 basis points below the IOER rate of 1.95%.” Many banks are bidding in the funds market. Yet it’s notable that transaction volumes have fallen sharply. This suggests that a key issue is the supply of funds available to the market. The Federal Home Loan Banks (FHLB) are the primary lenders in the funds market, but they themselves are subject to the behavior of their regional bank clients. If the FHLB has less spare liquidity, they have less money to lend in the funds market. According to recent studies, 90% of reserves are held by just 5% of the banks. There are two important implications of this skewed distribution. The first is that many and most banks will lose their excess reserve holdings before the system as a whole does. This will also put further upward pressure on the funds rate. The second is that banks that do have reserves will tend to be large, systematically important ones. On a different perspective, an effective funds rate rising more than the Fed would likely suggest a shortage of dollars out there. However, a flat-lining Libor begs to differ. Looking at the recent years, cross-currency basis swaps have been the go-to indicator to identify a global dollar shortage. Yet despite the tax-reform-induced withdrawal of dollar liquidity from global markets, the basis, an indication of implied rate premium that the dollar commands in the FX swap market has collapsed to its tightest levels in the years. With everything kept in mind, there could be a potential that banks run out of excess reserves soon and that the upwards pressure on the funds rate might not be going away. As the dollar starts to strengthen, investors unwind their long-held bets on emerging market stocks, currencies and bonds. The spark in the dollar has left developing countries in confusion and the ripple has spread. Hong Kong’s monetary officials took initiative to prop up their weakening currency while Indonesia raised rates for the first time in four years to arrest a drop in its currency. Currencies like the Turkish lira and Brazilian real are at its low against the U.S. dollar. Not only that, but the MSCI Emerging Markets Index and bond index have underperformed. Looking back at historical data, investors have flocked over emerging-market stocks over those in the developed world mainly due to the microeconomic problems in the developed nations.
However, a strengthening U.S. dollar and rising treasury yield has changed the environment and previous trends on emerging-market stocks. This is because a rising dollar makes it difficult for countries to service debt denominated in the US. currency, while rising yields diminish the attractiveness of foreign assets. Senior officials around the world say, “The markets are now realizing they have to pay attention to fundamentals and assessing which countries are the most vulnerable. A continued rise in the dollar and U.S. yield will punish comparatively healthy emerging markets alongside more vulnerable ones. The world tends to be a much happier place when the dollar is not going up.” They are particularly nervous about nations with large current-account deficits and those that rely on foreign investments in finance government spending. Their dependence on the rest of the world for government finances and trade leaves them badly exposed when the dollar rises. On a different note, politicians are also a worry. The Mexican peso has been dogged by concerns over the renegotiation of the North American Free Trade Agreement and a slowly creeping election. It has gotten fairly difficult for new investors to set foot into the market as volatility continues to spread throughout emerging-market assets. More recently, developing countries have largely loosened their currency pegs and built up reserves. Pegs don’t do well in a market that’s volatile because it gets challenged as the market become less stable. On the other hand, the new economic environment has left many emerging economies shielded by robust growth rates. Looking back into time, the European Central Bank’s (ECB) monetary policy decisions have been straightforward, but the time following 2020 could lead to some problems as the bank will face a more complex set of challenges in decision-making. The unemployment rate could fall, and economic growth could persist if the ECB tapers its asset purchase program to zero by the end of 2018 followed by a small increase in the deposit facility rate after the tapering. This will set the ECB up in a good position to raise interest rates by the end of 2019. As the current ECB president’s term comes to an end in October 2019, investors should stay tuned for the events leading up to policy changes and Mario Draghi ending his term.
However, leaving his position in a time like 2019 could mean that his successor will face a different set of challenges. One will be analyzing the extent to which the ECB can normalize policy rates before the U.S. and also before the eurozone economics fall into a recession. Another challenge Draghi’s successor will face is calibrating the instruments through which the ECB implements its monetary policy. This is not the end to the problems and challenges as there could be tensions of the U.S. Federal Open Market Committee (FOMC) raising the fed funds rate to 3.4% by the end of 2020. Analysts following macroeconomic trends claim, “We tend to think the market overestimates the extent to which the ECB can normalize policy rates. Gross exports of goods and services made up 47% of eurozone national income in 2017. Europe’s dependence on external demand will limit the extent to which the ECB can raise rates beyond zero once global growth slows down.” The ECB will have to use its balance sheet to counter deflationary pressure when confronted with the next recession since it will have limited scope to cut policy rates. With policy rates nearing zero during the next downturn, one way for the ECB to lower its term structure of interest rates would be to receive interest rate swaps while buying private sector assets. Lowering its term structure will also reduce firms’ borrowing costs, but as long as the eurozone lacks a centralized fiscal capacity, banks and their sovereigns will stay interlinked. With all of this in mind, Europe’s unconventional policies and low levels of interest rates are likely to persist. Investors in the eurozone short-term markets should expect a new phase of unconventional monetary policies in the near future. The stock market tumbled as the 10-year U.S. Treasury yield broke its 3% record in April 2018. This 3% number has spooked a lot of investors as they have been unable to successfully create a game plan for their respective portfolios. The yield has bounced back and forth from a high 2% level to 3%, which is just a readjustment from the market.
Looking at historical patterns, the 10-year treasury rate has stabilized itself at its peak every time. The current federal funds rate has a range of 1.5-%-1.75% with an estimate of an increase by 55 basis points by the end of 2018. There will be no surprise if interest rates are lower than in previous rate-hiking cycles if global rates are also low. Comparing the 10-year treasury yield to the nominal U.S. GDP curve, yields have stayed below the growth curve and will continue to do so because GDP does not seem to grow in the foreseeable future. Not only that, but yield gains in the current cycle are expected to be constrained because the Fed is still holding trillions of dollars in bonds from its quantitative easing efforts. However, recent market data suggests a time of high volatility and incremental rate hikes. Investors should look into redesigning their portfolio keeping in mind the current environment. Perhaps investors should consider buying in on core bonds as yields rise since it presents an attractive opportunity for portfolio diversification. With the current economy, investors should focus their attention on unconstrained strategies, which can alter bond duration and other market exposures without major constraints. Investing in high quality short-term bonds with yields of 2% or more seems like a great investment opportunity for investors looking to make serious profits while taking on some risk. On the other hand, if rates start to rise faster than expected, investors should look into moving away from equities and credit risk as they are known to underperform during rate hikes. It is understandable that with the upcoming market movements, short-term returns might spiral downwards, but investors should focus on the long-run diversification strategies for their portfolios. For all one knows, this could be an ideal time for investors to recalibrate their holdings. 4/24/2018 0 Comments Transformation of Retail LocationsWith hundreds of retailers closing down stores across the country, malls have witnessed a sad reality in the modern world: foot traffic is declining. Online sales are cannibalizing on sales of retail stores, a story that is hardly new to most investors. While there is a negative investment stigma associated with malls, the recent transformation in investment should be watched carefully.
Major owners of strip malls, such as the Federal Realty Investment Trust, are aware of the outlook and closings. Mall tenants in popular locations have re-strategized to transform malls into entertainment locations, shifting from retail-focused tenants. Amongst these new tenants are gyms and fitness centers. Market data suggests that implementation of boutique gyms draws more affluent customers and fit closer into the newly established parameter. Fitness centers have also been attractive due to market growth; memberships of health clubs have jumped 26% since 2009. As a result of these factors, landowner of over 115 malls, GGP, wants over half of its malls to contain fitness centers by the next decade, and Phillips Edison & Company has already implemented fitness centers in over 40% in its 340 grocery-anchored shopping centers. Nevertheless, Retail property landlords are overwhelmingly suffering at the moment while this transition takes place. Tenants are taking advantage of store closures and bargaining for cheaper and more flexible leases. An aggressive growth in this behavior could prove the transition to entertainment difficult. Keith Knutsson of Integrale Advisors commented, “A shift of strategy in a failing business is to be expected. If foot traffic is permanently affected by online sales, a pivot is needed.” |
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October 2018
CategoriesAll Investing Keith Knutsson Real Estate Real Estate Investing |