October 2023

September was a month when the Hawks took charge, confidence fell, and equity markets took a hit. In this environment, macro managers were the star performers, and by the close of the month, the HFRI Fund Weighted Composite Index was down -0.2%.

There is an excellent podcast with Peter Brown, the legendary CEO of Renaissance Technologies, speaking on Goldman Sachs Exchanges: Great Investors. Brown has proved himself time and again to be exceptional, not only as a mathematician and the inspiration behind the Deep Blue® IBM project.

It's no secret that the Americans have come hat in hand to the Middle East to raise money for their private-market funds for some time. In fact, asset managers of all stripes from the US have been making the 12-plus-hour flight from JFK to the Arabian Peninsula for many years.

Private debt is often seen as the new kid on the block, in reality its history goes back decades not least with private corporate lending. This lesser-known segment of fixed income is permeating the zeitgeist as investors come to grips with the sheer depth of the market at $1.5tn.

Direct lending, once deemed an alternative investment, has unmistakably carved its niche in the mainstream financial realm. Since 2013, direct lenders have amassed an astonishing US$250 billion, a testament to its allure in an era defined by low-interest rates.

The story of the rise in direct lending as traditional banks retrench is a familiar one for many investors. In another example of the market adapting to new trends, it is now beginning to take market share from the syndicated loan market.

Direct Lending is all the rage in the alternative investing space. Everybody is talking about it. Perhaps more importantly, investors are pouring money into the space. Why is Direct Lending the new, new thing?

Private credit continues to take center stage in the financial landscape, especially as traditional bank-arranged loan issuance has become more measured. Private credit has filled the void, providing more flexibility and becoming indispensable for economic growth.

This month, we look at the growth of the private credit market, which has developed to become a $1.5 trillion asset class over the past few years. On this front, a significant development in the space is SocGen and Brookfield teaming up to launch a $10.7bn private credit fund.

Banks are not the only ones getting into private credit funds as we start to see retail products being launched in the space. Blackstone's Private Credit Fund was the first big player to make the move and has now been followed by T Rowe Price and Oak Hill Advisors, which has launched T Rowe OHA Select Private Credit Fund.

Brookfield Asset Management has been busy over the last few weeks, having not only paid £1 billion for a vast UK wind farm, at a time when the sector is under pressure, but has also raised $12 billion for a flagship private equity fund.

Proof that reputation really does matter comes from the news that GIC Management has sold its investment - at a loss - in Vista Equity Partners. The redemption is a direct result of Vista founder Robert Smith's tax evasion issues.

Leo Markel is launching a new London-based activist fund, Finch Bay Capital. He is targeting $500 million and a first-quarter 2024 launch. Co-founding the fund alongside Markel, who will be CIO, is former ValueAct's Daniel Urdaneta.

After much publicity, SurgoCap Partners has officially launched with $1.8 billion in assets under management. This becomes the largest-ever female-led hedge fund launch and is run by former Lone Pine Capital portfolio manager Maia Gaonkar.

The sale of Sculptor Capital Management has yet to draw to a close. Sculptor, the largest US publicly traded hedge fund, has been in an uncomfortable situation for years, with accusations and counter-accusations and yet it still manages around $30 billion.

We have not written about an activist campaign for a while now, but it is worth flagging Nelson Peltz's revitalised Disney campaign. He feels he has given the returning CEO, Bob Iger, a fair crack of the whip, and it is now time to crank up the pressure.

An intriguing new alternative investment manager launching with $50 billion in assets under management and big ambitions is Lunate. This Abu Dhabi based business is part of Chimera Investment, owned by Sheikh Tahnoun bin Zayed Al Nahyan.

There has been a significant development in the multimanager sphere as Millennium Management and Schonfeld Strategic Advisors look at partnership options. According to the Financial Times, these two parties are at an 'advanced stage' of discussion.

JJJ Capital has recently announced one of the biggest launches of the year. This is a $3 billion inflation-focused hedge fund, set up by Joeri Jacobs and other ex Moore Capital traders.

Bloomberg reports on Kurt Baker prepping a large new multimanager fund, 30th Century Partners. If he achieves his target raise of $3 billion, this will become one of the biggest fund launches of the past few years.

As well as seeing plenty of new private credit funds, secondaries funds continue to trend. Most recently, Goldman Sachs has successfully raised $14.2 billion for its flagship secondaries fund, Vintage IX, which is above their target.

Goldman run Petershill Partners, the London-listed firm that takes minority stakes in private capital businesses, has cut performance guidance targets for this year. Today the firm has stakes in funds with assets of $300 billion.

Pogust Goodhead, the UK-based law firm, and Gramercy Funds Management have announced an intriguing $552.5 million investment partnership. This is a secured loan from Gramercy to Pogust Goodhead, which will fund the largest action of its kind against BHP Group and Vale.

Having released record results, Partners Group's senior management showed that they were happy to talk their book. CEO, David Layton, speaking to the Financial Times, said he believes that we are entering a 'new period of consolidation in the private equity world.'

European software investor Dawn Capital has successfully raised $700 million for two new funds investing in B2B software. The fundraising includes $620 million for Dawn V, their flagship early-stage investment fund, and a further $80 million for Dawn Opportunities III.

Venture capital firm GGV Capital, which manages over $9 billion, is separating its Asian business to create two independent entities. GGV has two China offices in Beijing and Shanghai and has been operating in the region since the early 2000s.

There is a change in the world of prime brokerage, with Marex announcing that it is buying Cowan's prime broking and trading business. This development comes as the fast-growing business looks to expand its offerings in the trading and execution space.

A colourful story that has caught our attention is Sir Paul Marshall partnering with Citadel's Ken Griffin to buy the Daily Telegraph. Given Marshall's liberal ties and Griffin's historical links to Trump, we are unsure how this will play out.

The FCA's Consultation Paper CP23/20, published on 25 September 2023, pushes forward the regulator's initiative to set minimum standards for diversity and inclusion within the financial services industry.

The FCA is working on a UK financial services handbook for a future outside the EU. The implementation of the Financial Services and Markets Act 2023 provides a framework for the making of UK rules and allows for the repeal of the retained EU legislation.

The SEC has published a Risk Alert providing additional information regarding its risk-based approach both for selecting registered investment advisers to examine and for determining the scope of risk areas to examine.

SEC and CFTC enforcement action continued apace in September 2023.

The SEC announced settled charges against D. E. Shaw for creating obstructions to whistleblowing by requiring employees to sign agreements prohibiting the disclosure of confidential corporate information to third parties, without an exception for potential SEC whistleblowers.

The SEC charged five broker-dealers, three dually registered broker-dealers and investment advisers, and two affiliated investment advisers for widespread and longstanding failures to maintain and preserve electronic communications.

The CFTC charged Highland Quantitative Driven Investments LLC, a formerly registered commodity pool operator, and its owner, Michael T. Zatorski, finding that the respondents violated anti-fraud provisions of the Commodity Exchange Act.

The SEC charged former analyst Anthony Viggiano, as well as Christopher Salamone, Stephen Forlano and Nathan Bleckley, for insider trading in advance of numerous merger and acquisition transactions.

The SEC announced settled charges against registered investment adviser AssetMark Inc. related to undisclosed conflicts of interest involving a cash sweep program operated by its affiliated custodian and its receipt of millions of dollars in revenue sharing payments.

The SEC charged DWS Investment Management Americas Inc., a subsidiary of Deutsche Bank AG, with failing to develop a mutual fund Anti-Money Laundering program, and separately for misstatements regarding its ESG investment process.

The SEC charged Wellesley Asset Management, Inc. with material misstatements and omissions in its marketing materials. WAM in January 2013 created an index to depict the performance of its convertible bond investment strategy from January 2000 forward.

The SEC has charged American Infrastructure Funds LLC, a registered investment adviser to private funds, with failing to disclose certain conflicts of interest and with breaching its fiduciary duty.

The SEC announced charges against registered investment adviser Artemis Wealth Advisors, LLC for failing to file quarterly Forms 13F for a period spanning over five years.

The CFTC issued an order simultaneously filing and settling charges against Jacob Orvidas, finding that Orvidas fraudulently solicited at least four pool participants to trade leveraged bitcoin in a commodity pool, lost almost all funds.

The SEC announced charges against five registered investment advisers for failing to comply with requirements of the Custody Rule related to the safekeeping of client assets.

The SEC charged private equity firm Prime Group Holdings LLC with failing adequately to disclose millions of dollars of real estate brokerage fees that were paid to a real estate brokerage firm owned by its CEO.