July 2024

June was dominated by US and European political intrigue and interest rate divergence, which suited equity managers far more than macro. The HFRI Fund Weighted Composite closed down 0.2%, while the Macro Index fell 1.7% with commodity exposure largely to blame at minus 4.1%. Relative Value was the best performer, up 0.4%, and India led the regions at 4.5%.

The fanbase for women's sports is on a meteoric rise, and so is investor appetite. Deloitte expects elite women's sport to produce some $1.28 billion in global revenue for 2024, breaking the billion-dollar mark for the first time. Sixth Street acquired a majority stake in Bay FC, and Carlyle acquired a majority stake in Seattle Reign FC for $58 million.

Hedge fund investor demand for commodities has always been cyclical, and following a long period of low interest it has increased at a considerable pace over the last twelve months. Demand comes from large institutional hedge funds through to smaller family offices, many venturing into pure play commodities for the first time and preferring diversified products.

Gold has outperformed expectations in 2024, trading above US$2,300 an ounce for most of the second quarter and up 12% year-to-date. Western investors have been the missing piece, with net outflows from gold ETFs, yet strong first-half performance suggests the market is not saturated. Central bank demand has driven reserve allocations to record levels.

One of the standout fundraises of the month was Specialty Loan Fund VI at HPS Investment Partners, which closed on $21.1 billion of investable capital including $14.3 billion in equity commitments and available borrowings. Roughly $10.4 billion went into the commingled fund and the rest into SMAs. The credit-focused firm manages around $114 billion.

Hamilton Lane closed Secondary Fund VI at $5.6 billion, its largest fundraise and above the original $5 billion target. The firm has been active in secondaries for more than 24 years, with the previous fund closing on $3.9 billion in 2021. It manages over $920 billion in AUM and supervision, with secondary investments totalling almost $30 billion.

Reuters reports plans at KKR to raise $20 billion for North America Fund XIV, following the $19 billion raised three years ago for XIII, which had an IRR of 20.5% to the end of March having deployed 64% of its capital. Marketing started in early June, with chief financial officer Robert Lewin noting the fundraising environment feels a little better.

Ardian raised $3.2 billion for its sixth-generation co-investment platform, a 23% increase on the previous fund, which attracted commitments from 188 investors globally. The fund provides access to minority investments alongside top-tier private equity sponsors and is already 40% invested through 18 transactions. Ardian manages around $166 billion.

HongShan closed its latest venture technology fund at $2.5 billion. Previously the China arm of Sequoia Capital, the firm drew decent coverage in the Financial Times as the biggest new venture fund in China in the past year. The RMB fund may ruffle US LP feathers in the USD-denominated vehicle, with potential investment in some sensitive areas.

Thomas H Lee Partners raised $900 million for its second automation fund, matching the previous vehicle. The strategy invests in automation-focused companies ranging from physical technologies such as robotics through digital technologies to artificial intelligence and hybrid technologies such as the Internet of Things.

Blackstone is planning to double the size of its European Private Credit Fund, which currently stands at €1 billion. Compared with its US cousin at $54 billion the fund is a minnow, but it is managed in similar fashion, with 80 to 85% private credit assets and the remainder in more liquid holdings.

With the venture funding environment proving tough going, the $900 million close at Industry Ventures is impressive. The San Francisco firm, which manages $8 billion, is taking a hybrid route with this fund, investing in emerging seed and early-stage funds through primary and early secondary LP interests alongside direct investments.

NB Private Markets Access Fund, the evergreen vehicle at Neuberger Berman, surpassed $1 billion in assets. Launched in 2021 through a registered structure, it provides direct exposure to private companies through an actively managed portfolio of private equity investments alongside access to co-investments and secondary investments.

Carlyle launched AlpInvest Private Markets Sicav, an evergreen fund for European private wealth clients. It is the latest step by the firm to target the private wealth market, with the private equity offering providing exposure to secondary and co-investment fund opportunities. It follows the launch of a US-registered equivalent last year.

According to Fortune, Andreessen Horowitz is planning the first private equity fund at the firm. The Perennial Private Equity Fund has been filed with the SEC and states that it will invest in the private equity asset class but says little more. The move runs through the wealth management division, Perennial Management, set up in 2022.

The Financial Times has written on the role of private equity in shaping the UK economy over two decades. The industry has left an indelible mark across sectors from high-street names to insurance and nursing homes, with aggregate transaction value peaking at £91 billion in 2006. Proposed tax rises on performance fees now raise relocation concerns.

Bain asks whether private equity has bottomed in its mid-year report. Deal-making slowed markedly in the first half of 2024 but there are signs of a potential recovery, albeit not a strong one. Multiple challenges remain, including sluggish exits, fundraising and low levels of distributed to paid-in capital, which impact the ability to raise new capital.

With data so important in the sector, the $2.6 billion acquisition of Preqin by BlackRock is an intriguing development. There are only a handful of quality hedge fund databases, so the marker has been set on value, with BlackRock winning against S&P Global and Bloomberg. Preqin will be kept standalone with data integrated into Aladdin and eFront.

After what seems an eternity, Jain Global launched at the start of July having been one of the most hyped start-ups. Original AUM ambitions were pared back but it still launched with $5.3 billion. Bobby Jain points to money flowing into private credit as one reason fundraising has been difficult. The firm has hired more than 200 people.

Pulling in sizeable seed money is the holy grail for launching hedge funds, but it can come with a price, as Sparta Capital Management discovered when Balyasny Asset Management pulled its investment after only one year. Bloomberg reports this was a $250 million managed account for the London activist manager, which lost 8% in the first quarter.

Speaking at the Bloomberg Invest Conference, Cliff Asness of AQR said machines play a more critical role at the firm. Automation has not been a traditional route for Asness, who has been more sceptical than others about this space, but he appears to have come around, allowing that letting the machine decide more is just a little bit better.

For so long Andurand Capital Management has been the big oil trader looking for the $150 barrel, but it has recently expanded focus to other commodities. Pierre Andurand is concerned about potential oversupply and has closed long oil futures positions, moving to copper and cocoa. The shift is tactical rather than a response to performance.

BlackRock is increasingly flexing its muscles in private wealth channels as it looks to open new routes to private markets. Its latest move is a partnership with Chicago-based GeoWealth providing access to private equity and debt funds in customised portfolios for US high-net-worth retail clients. The model portfolio business is expected to double in five years.

Secondaries are on the money right now, according to a Preqin LP survey in which just under two-thirds of those questioned saw the investment as providing decent opportunities. Preqin data backs this up, with three times more raised last year than in 2022 and 70% of those fund raises above target. Secondaries remain around 6.5% of the private equity market.

Any GP looking for sovereign wealth fund investment needs to do their homework, says Karen Khalaf of the private equity practice at Bain & Company. Speaking on the Dry Powder podcast she notes that no one cap fits all, that presentations need to be elevated and bold with differentiation mechanisms, and that funds want investment to be central to a GP.

The US Court of Appeals for the Fifth Circuit unanimously ruled against the SEC and vacated the Private Fund Adviser Rule in its entirety, finding that the regulator exceeded its authority. Adopted in August 2023, the rule added significant disclosure and reporting burdens. The Court held that the cited portions of Dodd-Frank applied solely to retail investors.

The SEC announced settled charges against Twenty Acre Capital LP for violating the Marketing Rule. From 2021 to 2023 the firm used advertisements based on the performance of a private fund it advised, when the material actually reflected the experience of a single investor with a 44.8% return against fund net performance of minus 5.7%.

The SEC announced settled charges against Mass Ave Global and its cofounder and chief executive for false and misleading statements to investors. From 2020 to 2022 the firm made misleading claims about fund holdings and disclosures, including modifying underlying portfolio data. The firm was fined $350,000 and the chief executive $250,000.

The SEC charged JAG Capital Advisors and its founder over a three-year scheme to defraud investors of at least $3 million. The founder and chief investment officer is alleged to have raised the money from nine investors by lying about fund performance, activity and risks, using around $1.1 million on personal expenses. Criminal charges followed in New Jersey.

The CFTC filed a civil enforcement action against Three Bridges Trading Fund and its founder, alleging a fraudulent scheme that solicited at least $2 million from approximately 50 investors for a commodity pool. Funds were misappropriated and concealed through false account statements, with some participants paid using money from others.

From 31 July 2024 fund managers may begin to use the new Sustainability Disclosure Requirements investment labels with accompanying disclosures. From 2 December 2024, funds without a label that make sustainability claims must give investors simple information on how they are invested. The regime does not yet extend to funds based outside the UK.