Education Archives - Servant Financial

What is Education Technology?

Written September 27, 2021March 27, 2024 by Ailie Carlene Elmore

Chalkboards, pencil sharpeners, and slide projectors: all represent old school educational tools. Today these low tech devices are being rapidly replaced by virtual reality, white boards that can record what is written, and most importantly, computers. The locus of education has quite literally changed, from a physical lecture hall to a virtual classroom in the cloud. Leading this revolution is education technology, also known as “EdTech.” Education technology combines information technology and computer software with a wide array of educational methods to foster learning and student growth. Combining tools like virtual reality and artificial intelligence with other forms of media like podcasts and instructional videos, Ed Tech is re-shaping the way people learn from ages 2 and up. The COVID-19 pandemic spurred growth within this sector and has some wondering whether this trend will continue post pandemic.

Spurred Growth from COVID-19 Pandemic

1.2 billion children around the world went from sitting in classrooms to sitting behind a computer in April of 2020. A new wave of e-learning, which uses computer assisted teaching to educate, persisted throughout school districts. Prior to the COVID-19 pandemic, online resources such as Coursera and Kaplan existed but were not as widely adopted. As teachers navigated e-learning, students and parents had to take a more self-taught approach to learning. E-learning offered students more flexibility in their learning environment and gave them opportunities to seek out more widely available resources in the digital world. As a result of COVID-19, researchers are projecting a $70 Billion increase in the e-learning investments in the next five years.

Major Players in Education Technology

There are a variety of interlocking participants within the education technology market. The government has been involved in the space since 1994 with the creation of the Office of Educational Technology within the Goals 2000 Educate America Act. As part of the United States Department of Education, it works to develop policy, media tools, and digital infrastructure to support education technology for K-12 learners. Prior, to COVID-19 there was little funding available to build an e-learning infrastructure and even post pandemic, resources are scarce particularly in rural or lower income areas.

Private industry has been eating up the opportunity to build out an education technology infrastructure and flourished even further during the pandemic. Experts predict by 2025 that there will be more than 100 publicly traded companies listed as an education or training companies with market cap’s greater than $1 billion. The ability for these companies to create cost-effective technology that can be integrated into a classroom setting or at home will be crucial to their growth. Companies such as Course Hero and Coursera help students learn a variety of subject matters such as calculus and biology through online courses and interactive platforms. Other companies such as Wondrium have capitalized on the fact that millions of Americans of all ages are seeking continuous learning experiences by offering courses in traditional university level topics such as history, economics, psychology, etc. as well as special interest topics like food, music, travel, and many more.

Education and training companies are projected to continue increased market cap growth.

While some traditional learning institutions may fight the education technology boom, many more public universities are embracing new ways of instruction and learning. For example, the University of Illinois at Urbana-Champaign has been at the forefront of investing in technology for classrooms and e-learning. In particular, through the Center for Innovation in Teaching and Learning, investments in eTexts have been made to integrate classrooms with online media. Craig Lemoine, the Director of the Financial Planning Program at Illinois, has worked to build 3 personal finance eTexts that not only can be used for student courses but eventually can be sold to private individuals or companies. “The final product matched our goal… High quality from authorship to final digital product, accessible across any number of learning styles,” said Dr. Lemoine.

Investment Opportunities in Education Technology

The market for education technology reached close to $75 billion in 2019 and is projected to grow at a 20% annual rate to $319 billion by 2027. In 2020 alone, $2.2 billion in venture and private equity capital was raised for U.S. education technology startups focused in augmented reality, artificial intelligence, and online course development. Block chain technology integration is also expected to drive innovation and investment in education technology as the academic world seeks better options for safeguarding student records and performing analytics.

Hardware development in EdTech dominants the market.

While the United States and other countries have embraced investment in education technology, it has not been as well received in China. In July of 2021, China announced regulations that banned companies from making a profit in the education sector. Particularly, companies offering tutoring services must be registered as non-profit. This caused many Chinese EdTech companies’ share prices to plummet. Domestically, investment in education technology continues to boom with no signs of similar government heavy-handed prohibition on for-profit business models.

There are a variety of options for investing in the nascent EdTech sector whether that is by investing directly in listed companies in the sector such as Chegg,Inc. (NYSE: CHGG) or Kahoot (Oslo: (KAHOT.OL). Note neither CHGG or KAHOT has yet achieved profitability. Another new, more diversified approach to publicly listed investment vehicles in this space is Global X Education ETF – EDUT, first listed on the NASDAQ on 7/10/21. EDUT seeks to invest in companies providing products and services that facilitate education, including online learning and publishing educational content, as well as those involved in early childhood education, higher education, and professional education. This ETF’s top holdings are major players in EdTech such as Chegg, Pearson, and Zoom. As a newer ETF, EDUT has only $8 million under management today. We will continue to monitor EDUT progress as a thematic investment possibility in education technology.

Future Implications and Growth Potential

As a challenger to traditional learning, EdTech has some people questioning if it will replace traditional learning methods. We believe EdTech will aid and augment traditional learning rather than replace it by creating more collaborative and productive learning environments that increase student engagement while increasing educator efficiency. EdTech is geared towards creating a more accessible environment for students to learn. However, many of EdTech’s benefits are highly dependent on a student’s ability to access this technology through broadband networks. Shockingly, 22.3% of rural Americans and 27.7% of Americans in tribal lands lack even basic broadband coverage.

We believe there is a high correlation between Opportunity Zones (low income communities), food deserts, and educational deserts. In the coming months, we plan to explore this overlap and devise purposeful investment strategies to improve the lives of children and families across the country. Check back next month for an in-depth analysis on investing in broadband and the opportunities it could present.

Investing with Purpose: Mid-Year Reflections and Resolutions

Written July 20, 2021March 27, 2024 by Olivia Glunz

Investing with Purpose isn’t an oxymoron. At Servant Financial, we believe that profit and principles go hand-in-hand. In early 2021, we identified five purposeful investing opportunities for this year and beyond. In light of the COVID pandemic, turbulent economic conditions, and the accelerating sustainability movement, we predicted growth in ESG investments, alternative investments, essential businesses, inflation hedges, and education.

As we pass the halfway point of 2021, we take the opportunity to reflect: were our predictions directionally accurate? Simultaneously, we look forward: what developments do we expect over the remainder of the year and beyond?

1. ESG Investments

ESG, or environmental, social, governance, refers to a company’s attitude and behavior toward its employees and community. ESG investing prioritizes the wellbeing of employees, society, and the earth. This trend is especially appealing to millennials and women, who continue to demonstrate their support for ESG investments in 2021.

In the first quarter of 2021, US sustainable funds set a new net inflow record of $21.5 billion. One analysis of 27 ESG funds from December 31, 2020 to May 17, 2021, found that 16 of the funds outperformed the S&P 500. ESG has become a momentum factor, as ESG funds and their underlying equities attract more fund flows which beget more fund flows. Experts predict that the sustainability market will only continue its tremendous growth—by 2030, the ESG market could reach $1 trillion.

Servant Financial’s ESG research continued in 2021. In recent articles, we explored markets and trends in energy storage, organics, and carbon credits. At Servant Financial, we are committed to learning and innovation to help you invest in a sustainable future.

2. Alternative Investments

Alternative, or nontraditional, investments not only diversify your investment portfolio but have tremendous potential to benefit communities in unique ways. Alternative investments look beyond traditional stocks and bonds: real estate, infrastructure, gold, and bitcoin are just a few of the myriad alternative investing possibilities.

Servant Financial has identified farmland as a meaningful and profitable alternative investment. Traditionally, the farmland market has boasted high returns and low volatility; furthermore, investors profit not only from land value appreciation but also regular rent collection.

Farmland, however, is more than a vehicle for profit—it provides a means for doing good. In January 2021, Servant Financial partnered with Farmland Partners (NYSE: FPI), the farmland industry’s leading REIT, to launch the Promised Land Opportunity Zone Fund. Promised Land purchases farmland in Qualified Opportunity Zones, economically-challenged areas designated by the IRS for preferential tax treatment. After acquiring the properties, Promised Land improves the farmland, perhaps by upgrading irrigation and drainage systems, increasing grain storage, or installing solar panels or wind turbines. In turn, land improvements benefit investors and farmers and revitalize rural communities.

Since its launch, Promised Land has acquired over 3,700 acres of farmland in three states, and the fund continues to grow. Witnessing our Promised Land vision materialize encourages us to continue to invest with purpose.

3. Essential Businesses

Over the past 16 months, the tumultuous events of the COVID pandemic have underscored the necessity of essential businesses. Crisis forced reconsideration of priorities, needs, and wants: ultimately, humans need food, shelter, healthcare, and energy. Over the past months, essential industries have demonstrated substantial growth, with impressive performances from the energy, real estate, and healthcare sectors.

Investing in these essentials, however, is not only financially savvy but socially impactful. In a recent article on the food industry, we highlighted the prevalence of food insecurity in America. Tragically, over 10% of American households experienced food insecurity in 2019. Further, about 19 million Americans live in food deserts, areas with limited access to food. Especially vulnerable to food insecurity are rural counties: 87% of the least food-secure counties are rural.

US food desert map.

These surprising, grievous statistics motivated us to take action. Why not augment Promised Land’s strategy—investing in and actively improving farmland in rural Opportunity Zones—to combat food insecurity in these communities? Currently, we are mapping the overlap between food deserts and Opportunity Zones. After identifying target counties, we plan to evaluate strategies and partnerships to invest in and improve food access in these vulnerable regions. Our two-pronged approach—improving both farmland and food access—will address food insecurity on both the production and distribution levels.

4. Inflation Hedges

Groceries, gas, hotels, hospitals: as any post-COVID consumer can attest, prices are on the rise. In the past year, prices have increased by 5.5%, the highest rate of inflation since 2008. While economists foresaw price jumps in the wake of the economic emergence from the pandemic, inflation rates have been higher than predicted. Although many experts are hopeful that inflation rates will dissipate as economic conditions normalize, continued inflation is a distinct and alarming possibility.

High inflation rates threaten investors; investment shares may be stable or increase in price, but if their growth rates cannot keep up with inflation, then these assets lose real worth. For example, US 10-year treasuries nominally yielding 1.3% have a negative real yield of (4.2%) with an inflation rate of 5.5%. Intent on protecting the value of their assets, investors are increasingly turning to inflation hedges, investments which boast relatively stable or diminishing supplies, i.e. scarcity value. While the value of the dollar decreases, inflation hedges like gold, bitcoin, commodities, and real estate resist price fluctuations or may rise in value with inflation. For example, farmland values are highly correlated with inflation.

Correspondingly, the prices of inflation-protected assets are important indicators of current inflation trends. Although gold value has slightly declined in the past twelve months, prices remain significantly higher than before the outbreak of the pandemic. Meanwhile, bitcoin prices have fluctuated greatly over the course of the pandemic; nevertheless, bitcoin prices are currently three times the price of twelve months ago.

As Federal Reserve Chairman Jerome Powell’s recent comments indicate, inflation rates will likely remain high in the coming months; the Fed has signaled markets that it will allow near-term inflation to run higher than its 2.0% inflation target. Consequently, savvy investors should consider safeguarding their portfolios with inflation hedges.

5. Education

Education is both personally and economically empowering. Teaching skills essential for high-wage jobs, education develops human capital, increases earning power, and alleviates poverty. According to UNICEF, an individual’s income increases 10% with every year of education received.

Conversely, barriers to a quality education hinder development; this fact has caused particular alarm during the pandemic, as many students were forced to pivot to virtual or hybrid learning. The fallout from this transition is staggering: 97% of educators report that students experienced at least some learning loss, while 53% described that learning loss as significant. This learning loss translates to real earning loss. McKinsey & Company predicts that white students will experience a 1.6% annual income reduction and Black students a 3.3% annual income reduction because of substandard virtual learning.

Educators report learning losses during the pandemic.

As these disturbing statistics indicate, improving and investing in education and educational infrastructure is urgent. Edtech companies are one appealing option. Innovative technologies enable independent learning and could allow students to make up for learning loss. Further, as the pandemic’s resolution remains uncertain, developing more effective virtual learning technologies and investing in broadband and other infrastructure in low-income communities is crucial.

Charter schools, high in demand especially in low-income communities, provide another investment opportunity. Investors can provide low-interest loans or purchase charter school bonds.

Finally, we believe there exists a strong correlation between Opportunity Zones (low income communities), food deserts, and educational deserts. In the coming months, we plan to explore this overlap and devise investment strategies to improve the lives of children and families across the country.

2021 has witnessed both frustration and excitement, turmoil and healing. Although the details of our post-COVID world remain uncertain, we are hopeful that the future will bring stability and opportunity. As we reflect on the past six months, we remain confident that our investments can build a bold, auspicious tomorrow. ESG investments, alternative investments, essential businesses, inflation hedges, and education provide opportunities to make a profit while making a difference. From farmland to food access, education to renewable energy, investing with purpose addresses societal challenges with integrity, creativity, and compassion.

Investing With Purpose in 2021

Written February 5, 2021February 6, 2021 by John Heneghan

At Servant Financial, our mission is to help you invest with purpose, but what does that mean? Everyone has different purposes and dreams in life to achieve fulfillment and happiness. We’re here to help you define yours and to find the investments that align with your unique values and preferences.

Whatever your purpose may be, there is likely an investment that will align with that goal and help you achieve it. Whether you want to create more financial security for your family, support your local community, save for retirement, or protect the environment, there are several investment opportunities to help you do so. Here are 5 purposeful investments that we believe will be trending this year and beyond:

1) ESG Investments

ESG stands for environmental, social, governance. ESG criteria are a way of assessing potential investments. These criteria evaluate a company’s environmental impact, its relationship with its employees, and its overall effect on the community in which it is located.

As described in our previous blog “Investing With Purpose,” ESG mandates account for one out of every four dollars under professional management in the United States, and one out of every two dollars in Europe. ESG is most popular among millennials, women, and high-net-worth individuals. 95% of millennials surveyed by Morgan Stanley in 2019 expressed interest in sustainable investing and 90% want to tailor their investments to their impact goals derived from personal values and beliefs.

ESG investing came of age in 2020, and millennials will continue to drive socially responsible investing trends in 2021 and for decades to come. Investments that satisfy ESG criteria can guide your decisions, making it easier for you to have confidence that your investments align with your purpose.

2) Alternative Investments

Alternative investments are a great way to create an investment portfolio that reflects your values. While traditional investments in stocks and bonds can provide a core component of a well diversified portfolio, a traditional 60/40 portfolio (equity/bonds) will simply not provide the same level of diversification as a portfolio that includes alternative investments.

Types of alternative investments include real estate, infrastructure, commodities, precious metals and alternative currencies. One alternative investment that Servant has recently pursued is U.S. farmland.

Farmland has proven to be a unique asset class that has historically delivered superior risk-adjusted returns and enhanced portfolio diversification. According to the TIAA Center for Farmland Research data, U.S. farmland has delivered annualized returns of 12.2% with volatility of 7% for the 48-year period ended December, 2018. These risk-adjusted returns were superior to any other major asset class.

Furthermore, TIAA data indicates that farmland has displayed negative or low correlation to other major asset classes. Farmland performance has historically been most correlated with broad inflation indices.

Servant Financial’s research of farmland and Opportunity Zone tax legislation culminated recently in a strategic alliance announced on January 21, 2021 with the farmland industry’s leading REIT, Farmland Partners.

Alternative investments like farmland or Bitcoin can open the door to non-correlated markets with different return and risk profiles which may better align with your goals and preferences. Alternative investments are also a great way to supplement your traditional investments in order to build more robust and personalized portfolios.

3) Essential Businesses

Essential businesses have been and continue to be great investments, particularly in periods of economic uncertainty. In the post-COVID-19 world, Servant Financial has been focused on three essentials for human existence: (1) people need to eat; (2) people need a place to live; and (3) people need energy sources to fuel their homes and transportation.

However, what businesses are deemed “essential” are constantly changing, particularly as human interactions become increasingly digital. In the modern era, we think of additional essential business like work-from-home technology solutions and delivery services, both of which hold strong and purposeful investment opportunities.

Our initial exploration into the essential business theme was in the agricultural space with work in U.S. farmland. Other essential industries that we foresee opportunities in and will continue to explore are non-traditional, more transient and spacious housing; renewable energy and carbon sequestration techniques; and continued digitization of human exchanges.

4) Inflation Hedges

A common objective for all investors, both young and old, is to protect the buying power of their savings and investments from losing value to inflation. Whenever inflation rises faster than the growth and income of an investment, an investor loses real buying power. This universal investment purpose is heightened in the current low interest rate environment with the 10-year U.S Treasury yielding just 1.1% and inflation running close to 2%.

Under these circumstances, investors are increasingly seeking inflation hedges to replace or supplement the fixed income portion of their portfolios. Inflation hedges are investments that tend to move in tandem with inflation, such as commodities and real estate. Commodities and real estate are typically costly to produce or construct. As the cost of production increases in the form of labor and capital inputs, commodity and real estate prices must rise to make it economic for the miners and developers to continue production.

This purposeful repositioning of portfolios with inflation hedges is becoming a virtual imperative in 2021. We believe that the Federal Reserve under Jerome Powell and the U.S. Treasury Department under Secretary Janet Yellen have effectively been merged into a single government enterprise intent on releasing the beast of inflation. After its latest policy meeting, Chairman Powell stated “Frankly, we welcome somewhat higher inflation. The kind of troubling inflation that people like me grew up with seems far away and unlikely.”

Signs everywhere suggest markets are rotating into inflation hedges with gold up 24% and Bitcoin (digital gold) up 273% in 2020; both outperformed every other major asset class. Commodities are also reviving after a 10-year bear market. Natural resources like agriculture, energy and metals are setting up for an extended 1970s-like run that seems more likely than Chairman Powell intimated.

5) Education

In 2020, education was drastically transformed as schools and universities were forced to adopt online-learning approaches in the post-COVID world. Much like the virus accelerated the work-from-home and business digitization trends, it accelerated the digitization and decentralization trends toward distance learning.

These trends will be highly disruptive to the highly centralized and structured educational networks established at the grade school, high school, college, and university levels over the past few hundred years. Online learning, digital classrooms, and alternative universities are becoming more popular and more desirable than traditional schools in many consumers’ minds. We see these trends accelerating.

Education is always a purposeful investment, and now, there will be more opportunities than ever to get involved with the transformational and highly scalable future of education either as a student or an investor.

Each of these 5 investment trends for 2021 contains many and varied investment opportunities, giving you the freedom to pursue your specific needs, values, and preferences. We believe that investing with purpose is largely about the future. Consider: how would you like to see the world and humanity transformed for the better? Investing with your eyes fixated in the rearview mirror may feel safe and comfortable, but will that approach prove foolhardy in the long run? Your purpose is a vision for the future; your investments should target and advance that purpose.

Purposeful investing creates a more meaningful connection between investors and their life goals and passions. Financial goals and life goals can be one and the same. Purposeful investing is the best way to create harmony between financial needs and your dreams for fulfillment, happiness, and achieving your life’s purpose.

Contact us today to learn more about investing with purpose and the opportunities that Servant Financial can help you discover on your life journey.