November 2024

Many of the macro forces that impacted September rolled into October, with war and election concerns driving global markets and the Vix closing the month up 36.5% at 23.2. Hedge funds found the going tough, with the HFRI Fund Weighted Composite down 0.7%. Only Relative Value showed a positive number, up 0.6%, led by Fixed Income Sovereign.

The size of the private credit market seems to know no bounds, with non-bank institutions having lent more than $2.1 trillion to corporate borrowers in a year. The IMF argues the market warrants closer watch, but in recent weeks a slight shift has taken place among regulators and academics that leans to a softer stance on regulation.

AIMA research found that 86% of hedge fund managers surveyed grant staff access to Gen AI tools, pointing overwhelmingly to time and cost savings across marketing, investor communications and administrative duties. Only around one in four believe Gen AI can enhance investment decisions, and fewer still that it can support portfolio optimisation.

The Standing Strong emerging manager survey, co-authored by AIMA and Marex, shows 48% of investors willing to consider funds with a track record of one year or less and 80% open to backing funds below $100m in AUM. Average time to secure new investments has risen from just over six months to eight months.

For alternative fund managers, the path from starting up to scaling up runs through a complex landscape of regulation, tax and operational considerations. Starting demands an in-depth grasp of the legal and tax framework of the chosen jurisdiction, while scaling shifts focus to operational efficiency, advanced regulatory reporting and expanding teams.

Outsourcing providers, once seen primarily as fund administrators handling back and middle-office functions, have grown into trusted strategic partners offering solutions across the value chain. Preqin estimates global alternatives AUM will reach $29.2 trillion in 2029, up from $16.8 trillion in 2023, driving demand for automated platforms and experienced teams.

Treasury management has evolved from a support function into a core strategic element, enabling funds to reduce costs, maximise liquidity and strengthen relationships with prime brokers. A key challenge is the lack of consistent, normalised data from prime brokers operating on legacy systems, leaving managers without a clear view of financing costs.

Millennium Management added $10 billion of new long-term capital to draw down over time as opportunities arise, having reportedly been able to raise double that. The firm is also weighing a strategic partnership with BlackRock that would dilute the 100% holding of Izzy Englander, and a new fund focused on less liquid assets such as private credit.

General Catalyst announced the largest new venture capital fundraise in the US for more than two years. The $8 billion haul includes $4.5 billion for core funds focused on seed and growth equity, $1.5 billion for its start-up strategy and $2 billion in separately managed accounts. Sector focus spans AI, defence, climate, industrials, healthcare and fintech.

Adams Street Partners raised $1.2 billion for its oversubscribed Venture Innovation Fund IV Program, further evidence that venture capital fundraising is not impossible. Investments include secondaries and direct positions. According to the firm, LPs included leading institutional investors, foundations, family offices and wealth platforms from three continents.

LGT Capital Partners raised $7 billion for Crown Global Secondaries VI, above the $6 billion target and the latest multi-billion dollar fund in a market showing little sign of abating. It holds high-conviction manager positions across buyouts, growth equity and venture capital. LGT has completed more than 430 secondaries transactions.

Third quarter numbers at Apollo came in ahead of analyst forecasts, with profits up 12% and the share price up 5%. Growth largely came from its asset management and retirement businesses, taking firm-wide assets to $733 billion. Deal origination is a stated point of focus, with $62 billion coming in across the business.

Apollo announced two evergreen secondary private market funds, Apollo S3 Private Markets Fund and Apollo S3 Private Markets Lux, targeting US and European accredited investors. They open access to diversified portfolios of multi-asset secondary investments across private markets. The S3 team sourced over $160 billion in such transactions over the past year.

KKR posted record fee revenue of $1 billion, driven by bumper management and capital market transaction fees. The firm raised $23.9 billion of new capital in the quarter, taking the year-to-date figure to $38 billion, and invested $9 billion against uncalled capital of $108 billion. Assets under management stood at $624 billion, up 18% year-over-year.

Blackstone third-quarter results came in at the top of analyst estimates, with strong performance in corporate private equity. Inflows reached $40.5 billion, with $21.4 billion heading to Credit and Insurance. Assets under management stand at $1,107 billion, up 10% year-over-year, with $171.6 billion of uncommitted capital still to deploy.

Former senior Goldman Sachs partners Tom Connolly and Michael Koester have officially launched 5C Investment Partners and started investing, raising $1.6 billion including leverage over 14 months. Backers include DFO Management, the investment vehicle of Michael Dell.

According to pension documents reported in the Wall Street Journal, Brookfield is aiming to raise $1 billion for an infrastructure finance fund, pledging $250 million of its own capital and targeting a 12% IRR. It is a first foray into structured finance for a firm encompassing around $1 trillion in assets.

A new era of super funds and deals is emerging as large managers team up with powerful strategic partners. BlackRock launched a $30 billion AI-focused fund alongside Microsoft in September, and in October KKR announced a $50 billion partnership with Energy Capital Partners focused on data centres and power generation for AI and cloud computing.

Mubadala Capital, the $23 billion alternative asset management business of the Abu Dhabi sovereign fund, signed a memorandum of understanding with Seviora Holdings, the $51 billion asset management firm of Temasek, to explore co-investments. It follows the close of MIC Capital Partners IV at $3.1 billion against a $2 billion target.

According to the Goldman Sachs Private Market Diagnostics survey, investors have shifted from cautious to courageous on new strategies and investment approaches. Of the 190 LPs surveyed there is increased appetite for private market investments and co-investment opportunities, though allocations remain under-weight, particularly to private credit.

The Harvard endowment and other large endowments had a second year of underperformance against rebounding US equity markets, with private equity, venture capital and hedge funds weighing on returns. The Harvard portfolio, 39% private equity and 32% hedge funds, still outperformed its targeted 8% return with 9.6% for fiscal year 2024.

Preqin research forecasts the private equity sector to double in size by 2029, from $5.8 trillion to $12 trillion. Its Future of Alternatives 2029 report puts total global alternatives AUM at $29.2 trillion by 2029, breaking $30 trillion by 2030. Distressed debt is expected to outperform, while late-stage and European venture capital lag.

Coatue Management is aiming to raise $1 billion for a fund investing in artificial intelligence and tech innovation, according to Bloomberg. Most of the capital will come from institutions, with a smaller amount from individuals through a Raymond James agreement, echoing a 2017 arrangement with JPMorgan Securities. Coatue holds positions in more than 200 tech companies.

Ares Management is buying the international arm of GLP Capital Management. On completion the $3.7 billion acquisition will make Ares Real Estate one of the largest vertically integrated platforms globally and almost double its AUM to $96 billion across North America, Europe and Latin America, adding scale in Japan where GLP runs a large listed REIT.

Brevan Howard has been open about its digital asset ambitions but less forthcoming on exposure. Speaking at the AIM conference in Dubai, head of compliance Ryan Taylor disclosed that around $2 billion of the $35 billion AUM at the firm is in crypto, with a significant portion of trading conducted from the UAE.

Elliott has added podcasts to a well-thumbed activism playbook of letters, presentations and websites, with Southwest Airlines the subject of a 20-minute episode available on Apple, Spotify and YouTube. The first episode features the former chief executive of WestJet discussing the value he believes can be delivered at Southwest.

On 2 October the Court of Appeal upheld the appeal of the FCA in FCA v BlueCrest Capital Management (UK) LLP, dismissing the cross-appeal. The regulator found in 2021 that BlueCrest failed properly to manage conflicts of interest, breaching Principle 8, and sought redress estimated to exceed $700 million for non-US investors in an external fund.

The FCA imposed a financial penalty on Kristo Käärmann, chief executive of Wise Assets UK, for failing to report an HMRC fine of approximately GBP 365,000 arising from an undeclared capital gains tax liability. He was found in breach of Senior Manager Conduct Rule 4 and fined GBP 500,000, reduced to GBP 350,000 for early settlement.

Market Watch 80 considers how firms can comply with SYSC 6.1.1R when dealing for overseas clients operating aggregated accounts with no visibility of ultimate beneficial owners. The FCA identifies potential for market abuse in leveraged equity products administered through what it calls obfuscated overseas aggregated accounts.

The FCA published key findings from its culture and non-financial misconduct survey, sent to over 1,000 regulated firms representing around 325,000 employees. Incidents have increased, with bullying at 26% and discrimination at 23% the most reported types. Disciplinary or other action was taken in 43% of cases.

The Division of Examinations announced its 2025 priorities, highlighting the continued evolution of the SEC in response to technological innovation. Focus areas include the duty of care and loyalty of investment advisers, compliance programmes, advisers to private funds, cybersecurity, the use of AI and automated investment tools, and cryptoassets.

The SEC announced settled charges against GQG Partners for using non-disclosure agreements that made it harder for candidates and a former employee to report potential violations. Between November 2020 and September 2023 the firm entered into NDAs with twelve employment candidates requiring them to notify it before responding to government inquiries.

The SEC announced settled charges against 23 entities, including seven investment advisers, for belated reporting on holdings in publicly traded companies. The sweep focused on timely beneficial ownership reporting, specifically Schedules 13D and 13G for firms and Forms 3, 4 and 5 for corporate insiders. Fines exceeded $3.8 million.

The SEC announced settled charges against Marathon Asset Management for failing to implement and enforce policies designed to prevent the misuse of material non-public information. The distressed debt strategy of the firm meant routine participation in ad hoc creditors committees, for which the SEC found its policies inadequate.