Big Idea:

A recent survey by global investment firm KKR highlights a significant pivot among family offices towards private equity investments, driven by a search for stable, long-term returns.

Why It Matters:

Family offices are making a strategic pivot towards private equity, drawn by the promise of long-term, sustainable returns. This alignment with private markets fund managers on investment timelines further solidifies the trend. It reflects a cautious approach in a volatile market, emphasizing the importance of return on and return of capital.

Key Details:

• Family offices are now allocating 52% of their portfolios to alternative investments, a 2% increase since 2020.
• The growing preference for private equity over venture capital among family offices.
• This trend may reshape fundraising dynamics in the private markets, favoring established names and emerging managers with proven track records.

Dive Deeper:

The current fundraising environment in private markets is described as challenging, with the process now taking an average of 22 months, a substantial increase from the nine months seen during the COVID period. This has led family offices to be more selective, gravitating towards established, top-quartile brand names for growth and buyouts.

The Intrigue:

Despite the tough fundraising climate, emerging fund managers with a solid track record, even if brief, have opportunities. Notably, those with high-impact exits (returns of four to four and a half times investment) can attract attention from family offices.

The Bottom Line:

Despite a current preference for private equity, there are indications of long-term interest in venture capital from family offices. This interest is part of a broader trend of increasing allocations to the private equity bucket, which includes buyouts, growth stage investments, and venture capital, with some family offices moving into double-digit allocations to venture capital.

Big Idea:

As the world transitions to renewable energy and EVs, copper has emerged as a key component of technological innovation and sustainability.

Why It Matters:

The global copper industry faces a tumultuous landscape marked by significant supply disruptions in major producing countries like Peru and Panama, juxtaposed against a backdrop of soaring demand, particularly from China.

Details:

Protests in Peru, following the ousting of President Pedro Castillo, and legal challenges in Panama have significantly disrupted copper production. A strike at Peru's Las Bambas mine and Panama’s top court ruling against First Quantum Minerals' operation of the Cobre Panama mine have together resulted in a loss of nearly 600,000 tonnes of copper production.

State of Play:

Contrary to expectations of a slowdown, China's copper consumption reached a record 27.54 million tons in 2023, driven by military, national security demands, and a recovering property sector. Anticipated financial injections are expected to further boost demand, challenging the consensus view of a weakening market.

Yes, But: 

The shutdown of key mines and reduced ore quality in Chile have led to a tight copper market, with current prices deemed too low to incentivize new mining projects. Forecasts suggest the price needs to reach $15,000 per tonne to address future deficits and encourage greenfield projects, significantly higher than the current price of approximately $8,200 per tonne.

The Intrigue:

The Li Keqiang index, reflecting more volatile economic growth in China than official GDP figures suggest, shows a strong correlation with copper prices. Goldman Sachs predicts a significant copper deficit in 2024, exacerbated by mining disruptions, and warns of a tight market entering a period of clearer tightening.

What’s Next:

Copper's critical role in the global green economy is underscored by its inclusion in the US Department of Energy's critical materials list. With demand likely to double by 2035 for net-zero emissions targets, shortages could impede global growth, increase manufacturing costs, and jeopardize climate goals. The industry faces challenges in meeting demand due to supply constraints, underinvestment, and ongoing demand from China.

Big Idea:

The inclusion of nickel in Australia's list of critical minerals opens a new chapter of governmental support for the industry, aiming to revitalize an essential link in the global green technology supply chain.

Why It Matters:

To protect its nickel sector from the protracted downturn in global prices, the Australian Federal Government has earmarked nickel as a critical mineral, thereby qualifying it for a significant A$6 billion stimulus package. This decision underscores a commitment to sustaining the country's nickel production.

State of Play:

The nickel industry is facing oversupply, primarily driven by increased production of lower-grade ore in Indonesia, which has led to a significant price slump. This has challenged the viability of Australian operations but also has broader implications for the global supply chain.

Key Details:

• The international nickel price is anticipated to remain subdued through 2024, influenced by market oversupply.
• Nickel's critical status for green technologies places it at the heart of the energy transition.
• The stimulus aims to stabilize the Australian nickel industry, ensuring its contribution to global energy transition efforts.
• Key players like BHP and Glencore have faced profitability challenges, prompting reevaluations of their nickel ventures in Australia.

Details:

Australian mining company BHP Group experienced an 86% decline in net income for the first half of the year , leading to a $2.5 billion impairment on its Australian nickel assets. Their CEO Mike Henry highlighted a potential multi-year period of nickel oversupply lasting until the end of this decade, emphasizing the current unprofitability of their nickel business amidst this prolonged market condition.

"The support for nickel producers is vital for our national interest as well as the global push towards a more sustainable future," stated Madeleine King, Australia’s Minister for Resources.

Dive Deeper:

The decision to support the nickel industry reflects a broader strategic imperative to secure Australia's place in the supply chains for technologies essential to the energy transition. By fostering a more resilient and sustainable nickel sector, Australia not only safeguards its economic interests but also contributes to the global effort to combat climate change.

Yes, but:

The global nickel market remains volatile, with price recoveries contingent on broader industry adjustments and demand for high-grade nickel.