August 2024

In the first half of this year, intense geopolitical wranglings, political manoeuvring and diverging interest rates combined to create a high degree of uncertainty. China's protracted property downturn and weak consumer demand negatively impacted growth.

Here's an allegory... Imagine you're about to compete in the famous "running of the bulls" in Pamplona, Spain. Everyone is excited to be part of the action, nervously anticipating the risk and reward you are about to be confronted with once the gates open behind you.

In an article published in the Alternative Investor in April 2023, I examined the emergence of the "family investment firm": modern family offices increasingly focused on "wealth creation" rather than traditional "wealth preservation".

As we enter 2024, fund managers in the alternative investment market face intense competition for capital and challenges in effectively investing that capital. These challenges are not new, yet they continue to be a concern.

The alternative investment space has seen some significant trends and changes this year, marked by what I think are some of the main themes that will push through into 2024.

Artificial intelligence (AI) is transforming and disrupting how we do business and how we live our lives. This change is on the same scale as prior industrial revolutions like the steam engine and electricity.

As of December 2021, the Global Impact Investing Network estimated that worldwide AUM across Impact Investing managers exceeded USD 1.1 trillion. This is roughly equivalent in size to the global private credit market and therefore, by anyone's standards, an asset class to take seriously.

ESG and sustainable investment continue to attract significant capital inflows globally. Investors from retail to institutional are driving demand for asset classes and products that produce strong returns with clear social and environmental benefits.

The dynamic landscape of digital asset markets is undergoing a profound transformation. What began as a grassroots movement of individuals in search of an "orange pill," has evolved into a regulated industry experiencing rapid financialization and institutional adoption.

In September 2023, Blue Dot Capital (Blue Dot) published our inaugural snapshot of the environmental, social, and governance (ESG) programs and practices of the world's ten largest private equity (PE) firms (per Private Equity International's 2023 PEI 300 ranking).

ESG credentials and strategy are the biggest influencers when it comes to making fund investment decisions, according to research among alternative fund managers across the UK, US and Europe carried out by Ocorian, specialist provider of alternative fund services.

Developments in sustainable finance regulation have come thick and fast under the current European Commission – the most seminal of which has been the introduction of the Sustainable Finance Disclosure Regulation (SFDR) in 2021.

Fund managers are continuing to see divergence of approach to ESG on each side of the Atlantic putting strain on their ability to satisfy their international clientbase.

The focus on non-institutional investors has significantly increased in recent years. The "democratisation" or "retailisation" of private markets and funds is this year's hot topic.

The "democratisation" of private markets has come into increased focus in recent years. Broadly speaking, this refers to the process of making available to private investors certain asset classes traditionally only accessible by professional investors.

The key components driving the transformation of the global alternatives (alts) industry are clear: Unspent capital sitting in private markets and the influx of high-net-worth investors have fund managers preparing for a trillion-dollar tsunami in the alternatives marketplace.

With traditional managers reporting assets falling, the alternatives space has seen steady growth, peaking broader interest from retail/HWNIs in the search for higher returns, impacting allocation recommendations and breaking down regulatory barriers.

It's once again that time of year where winter's thaw has ebbed, cool showers are raining on warming grounds, and dried brown stems are forming green shoots. However, new growth is not just showing up in our garden beds—it is also renewing itself in both institutional investing and in crypto.

"Tokenization" is the application of smart contracts to securities, commodities, real estate, and other asset classes. It is useful when it either decreases the cost of using the asset or increases the productivity of the asset.

Decentralized finance (DeFi) is shaking up the financial landscape. The rise of Real World Assets (RWAs) on the blockchain, as evidenced by high-profile launches like BlackRock's recent BUIDL fund, highlights the growing acceptance and excitement surrounding this technology.

The landscape of alternative investment funds is undergoing a significant transformation, as individual investors seek to access non-traditional asset classes and strategies that were once restricted to institutional and professional investors.

In recent years, the United Kingdom's venture capital scene has been under intense scrutiny, with calls for more inclusive and diversified investment practices. The 2019 Rose Review of Female Entrepreneurship highlighted the persistent gender funding gap.

At the current pace of alternative asset management and insurer acquisitions, strategic partnerships and the like soon people will say that peanut butter and jelly go together like private credit and annuities.

Hedge Fund investor demand for commodities has always been cyclical. Following a long period where interest in the asset class was low, in the last twelve months we have seen interest increase at a considerable pace.

Reflecting on 2024 so far, gold has outperformed expectations when we consider the factors at play. Traditionally, a high interest rate environment coupled with a strong US dollar would be a hostile environment for gold.

The first half of 2024 ended with a series of setbacks for the Securities and Exchange Commission ("SEC"). In a significant development for private fund advisers, on 5 June the US Court of Appeals for the Fifth Circuit unanimously ruled against the SEC and vacated the Private Fund Adviser Rule ("PFAR") in its entirety.

At the end of 2022, Jeremy Hunt, then UK Chancellor of the Exchequer, announced a set of reforms to drive growth and competitiveness in the financial services sector. Known as the "Edinburgh Reforms", this took forward the government's (post-Brexit) ambition for the UK to be the world's most innovative and competitive global financial centre.