February 2024

From a macro perspective January was a mixed month, with the European economy skirting recession and the US confounding with 3.3% growth in the final quarter. The HFRI Composite index was up 0.3%, with all sectors bar Event Driven in positive territory. Regionally the standout performer continues to be the Indian market, up 3.8% and now up 42% over 12 months.

Private equity firms, often called the builders of business, are out on a buying spree actually acquiring the builders themselves. In this year alone we have seen BlackRock acquire Global Infrastructure Partners for $12.5 billion, followed by General Atlantic acquiring Actis. Infrastructure is expected to be one of the fastest growing sectors, already estimated at $2.5 trillion.

As of December 2021 the Global Impact Investing Network estimated that worldwide AUM across impact investing managers exceeded USD 1.1 trillion, roughly equivalent in size to the global private credit market. Impact reports have been notable for their lack of comparable information, but industry groups such as the UNPRI are promoting standardised terminology.

Litigation finance, also known as third party funding, involves providing capital to claimants or law firms to cover legal costs in exchange for a share of the proceeds if the case succeeds. With its often non recourse nature, returns typically exhibit low correlation with broader market movements, offering investors a way to diversify and reduce systemic risk.

The dynamic landscape of digital asset markets is undergoing a profound transformation, from a grassroots movement into a regulated industry experiencing rapid financialization and institutional adoption. Driving the momentum is the surge in regulated trading volumes propelled by SEC approval of spot ETFs, alongside enhanced frameworks in the UK, Switzerland and Singapore.

Cinven has raised $14.5bn for its flagship fund, the Eighth Cinven Fund, which is 30% larger than the previous fund. It will invest in control positions in growth oriented, market leading, cash generative companies with resilient characteristics. The firm extended the close from July to January to ensure it hit the hard cap, and today manages €39 billion.

Brookfield has announced a first close of $10 billion for its second Global Transition Fund and is on target to beat the $15 billion raised for the first. Co-headed by Mark Carney and Connor Teskey, it focuses on investments that accelerate the global transition to a net zero economy. Seed investments include a UK onshore renewables developer.

According to reports Blackstone is prepping a new $10 billion fundraise for an opportunistic credit fund. This will be the fifth in the series and follows other successful fundraises in credit and recent funds by the firm. The previous credit vehicle, Blackstone Capital Opportunities Fund IV, raised $8.75 billion at its close in January 2022.

Acrmont Asset Management has announced the final close of its direct lending fund, Direct Lending Fund IV, at €10 billion against a target of €8 to 10 billion. Like previous funds it is investing in a defensive, diversified portfolio of mainly first lien senior and unitranche loans. The fund has already committed around 55% of its capital.

BlackRock fulfilled the diversification brief by acquiring Global Infrastructure Partners in early January, adding around $100 billion of AUM and breaking new ground for the firm. Mid month General Atlantic bought sustainable infrastructure investor Actis, while the seventh Macquarie European infrastructure fund closed at over €8 billion.

The amount of dry powder US venture capital funds are sitting on is impressive, although a rounding error compared to private equity. PitchBook data puts US VC undeployed capital at $311 billion, while S&P Global estimates private equity dry powder at the end of 2023 at around $2.6 trillion. Funds are turning to continuation vehicles to provide liquidity.

Secondary market transactions totalled $112 billion in 2023, up from $108 billion the previous year although down on the $132 billion of 2021. What marked the year was the uptick in the second half as deal volumes increased by 60%. Jefferies puts the increase down to LP desire to generate liquidity or derisk portfolios, and estimates dedicated capital at $255 billion.

The 2023 numbers show the biggest profits ever recorded by some of the largest players in the market. At the front of the pack was TCI with net gains of $12.9 billion, followed by Citadel with $8.1 billion and Viking Global Investors with $6 billion. The figures come from the LCH Investments ranking of the 20 most profitable hedge funds of all time.

Hedge fund performance was on the whole good, with the HFRI Fund Weighted Composite Index up 7.6%, but there were two sides to the picture. Rather than the Composite, where every fund carries equal weight, the Asset Weighted index returned a paltry 0.5% in December and 3.6% for the year. Prominent macro players in the systematic space did not cover themselves in glory.

After a subdued 2023 there have already been some spicy hedge fund launches. Diego Megia, with an exceptional pedigree from Citadel and Millennium, is looking to launch Taula Capital with $5 billion, and already has a $3 billion seed investment from Millennium. Freestone Grove Partners launched in mid January and Jain Global follows later this year.

There has been plenty of coverage surrounding the upcoming Bobby Jain fund launch, with high profile hires, big ambitions and an impressive Millennium track record. Achieving an $8 to 10 billion launch in this market was always going to be a big ask, and expectations are being revised down towards $5 to 6 billion, which would still make it among the biggest of the year.

Sir Michael Hintze was never going to be quiet for long. According to Bloomberg he is back with his sleeves rolled up, although he would say he never downed tools. Having sold most of the CQS business to Manulife Investment Management last year, the remaining parts including the Directional Opportunities fund are now run by Jersey based Deltroit Asset Management.

It is almost 30 years since the GLG name was established and 14 years since Man Group acquired the firm, and now the GLG name is no more. Bloomberg reports that Man is also retiring the Man Global Private Markets and Varagon names as it reorganises its discretionary trading arms into a single unit. With the demise of the brand goes its chief executive.

Like Pac-Man, the large multimanager funds are gobbling up hedge funds as they add them to their offering. The latest to fall is Crescent Asset Management Asia, which is joining the biggest of them all, Millennium Management. Bloomberg reports that Crescent has been managing money for Millennium in a separate account for several years.

Back in the day it would be an honour to intern for a leading financial firm for very little remuneration. It is all very different now as funds fight for talent, particularly in quant, where super smart interns can quickly make a difference and often better understand the latest coding. According to Financial News, Bridgewater is offering engineer interns $42,000 for eight weeks.

The Morningstar 2023 Global Sustainable Flows Report reveals a mixed picture. In the fourth quarter Europe attracted $3.3 billion of net new money while the US saw $5.1 billion leave, for a global net result of $2.5 billion of outflows, the first time on record that net quarterly flows have been negative. Global sustainable fund assets still rose to $3 trillion.

While most crypto hedge funds that survived the fallout from Silicon Valley Bank, FTX and Signature Bank closed the year with healthy returns, most did not match the 160% rise in Bitcoin. One that did was the $50 million Parataxis Absolute Return Fund, up 341% from investments in Bitcoin and Solana. Its chief executive believes Bitcoin will hit $200,000 by early 2025.

Form ADV is the uniform form used by investment advisers to register with both the SEC and state securities authorities, and must be filed annually 90 days after the end of a firm's fiscal year. Common deficiencies include incomplete or inaccurate disclosures, failure to update information timeously, and inconsistencies across the different parts of the form.

The FCA has expressed concerns about instances of possible flying and printing, and about firms' management failing to deal with the behaviour. Flying involves communicating that a firm has bids or offers when they are not supported by an order or a trader's actual instruction. Printing involves communicating that a trade has been executed when none has taken place.

The Prudential Regulation Authority has fined the former chief executive of Wyelands Bank £118,808 for breaching three PRA Conduct Rules between March 2016 and May 2020. The failures focus on the large exposures regime. Investment firms are subject to the Conduct Rules and Senior Manager Conduct Rules under the Senior Managers and Certification Regime.

The FCA ran a webinar on 5 January 2024 setting out next steps for firms subject to the Consumer Duty, which took effect on 31 July 2023 and aims to set a higher standard of consumer protection. Two focus areas are due for completion by 31 July 2024: closed products, and annual board reports assessing how effectively good outcomes are being delivered.