December 2024

November was dominated by the return of Trump, his aggressive policies, controversial appointments and his influence on crypto markets, which encouraged a healthy US rally. Hedge funds clearly profited, with the HFRI Fund Weighted Index up 2.6% and gains across all significant strategies. Equities led at +3.4%, while emerging markets trailed as tariff concerns weighed on sentiment.

Silent green may become the guiding catchphrase under the Trump administration. The changing of the guard in Washington in January has prompted educated guesses on what shifts may take place for the green economy and energy transition. Climate businesses will face demand and price headwinds but remain an important alternative in the private markets.

Almost forty years after UCITS opened regulated access to public assets for individual investors, market participants are exploring how to replicate that for private assets in Europe. ELTIF 2.0, in force since January 2024, simplified asset definitions, provided for semi-liquid structures and removed minimum investment amounts, allowing better scope to democratise access.

Rapid expansion of private credit products has led to increased competition and overlapping issuer exposure among funds, pushing investors towards strategies with higher barriers to entry such as asset-based lending. Loans secured against accounts receivable, inventory or fixed assets carry lower leverage, greater downside protection and higher recovery values than cash flow lending.

Private credit is a broad category, and while the first leg of its rapid expansion was driven by direct lending, much of the focus is now on asset-based and asset-backed lending. Loans are tied to hard assets such as aircraft, railcars and real estate, or to portfolios of financial assets ranging from business receivables to music and pharmaceutical royalties.

The UK has a severe housing crisis, with a government target of 300,000 new homes annually against recent delivery averaging 188,000. Since Basel III, commercial banks have scaled back development lending and private credit providers are now the majority lenders, particularly for the SMEs responsible for 40% of overall housing delivery.

Apollo bought most of the significant risk transfer linked to $3 billion of Deutsche Bank debt, cutting risk weighted assets from an estimated 150% to 15% on 82% of the reference portfolio. In a zero-default scenario the SRT is a strong trade, but losses in the actual portfolio get amplified within the structure.

Swedish listed manager EQT hard capped its ninth Asia-focused fund at $14.5 billion, above the $12.5 billion target it had only set in August. BPEA Private Equity Fund IX invests in healthcare, technology, business services, education, financial services, consumer and advanced manufacturing. The predecessor fund raised $11 billion in 2022.

Bain Capital closed its latest Global Special Situations Fund at $9 billion including co-investments and separately managed accounts, a figure that takes in $3.3 billion from previously closed Asia and Europe regional funds. The fund invests across capital solutions, hard assets and opportunistic distressed. Bain manages more than $20 billion in the strategy.

According to a regulatory filing, TPG held a first close on its second private equity climate fund, Rise Climate II, with $5 billion of total commitments. New Private Markets reported that the firm, one of the largest impact investors globally, is looking to raise $10 billion for the strategy.

Bain Capital raised $3 billion for its fourth Life Sciences fund, above the $2 billion target. It invests in innovative medicines, medical devices, diagnostics and life sciences tools that address unmet medical needs. Since launching the strategy the team has raised $6.7 billion and invested in over 70 companies that have launched more than 100 clinical trials.

Shamrock Capital, the Los Angeles based media and entertainment private equity business, closed its latest fund with $1.6 billion of capital commitments. The over-subscribed fund invests in buyouts and later-stage growth equity in middle-market companies. Shamrock was founded in 1978 as the family investment company for Roy E. Disney and today manages $6.6 billion.

Millennium Management has accelerated external investment allocations, with Bloomberg reporting $1.5 billion to the macro trading business of Robert Tau and $1.75 billion to Andora Partners of Daniel Engel-Hall, a Millennium-branded fund. That follows $1 billion to New York long/short manager Scopia Capital and $800 million to NorthArrow Capital for a merger arbitrage strategy.

First reported by the Financial Times, the acquisition by BlackRock of HPS Investment Partners is valued at up to $12 billion and marks a pivotal moment for a firm that had been weighing an IPO. The deal takes combined private credit assets to roughly $250 billion, putting BlackRock in direct competition with Apollo, which manages around $600 billion.

Blackstone invested $3.5 billion in EQT Corporation, the US energy business, with its credit and insurance arm establishing a new midstream joint venture in EQT infrastructure assets. The non-controlling equity stake in the venture is valued at approximately $8.8 billion and allows EQT to pay down a term loan and redeem senior notes. Rating agencies do not treat the finance as debt.

Mubadala Investment Company announced a strategic partnership with Silver Rock Financial, previously the family office of Michael Milken before it was turned into a hedge fund in 2016. Mubadala Capital takes a 42% stake in the Los Angeles credit manager, which runs over $10 billion, with an option to increase to 55% and a commitment of over $1 billion to its funds.

Stonepeak, which manages around $70 billion in infrastructure and real assets, acquired private credit investor Boundary Street Capital. The Virginia-based business specialises in private credit investing in digital infrastructure, energy and energy transition, with capital commitments of $700 million. Stonepeak has invested in private and secondary infrastructure credit since 2018.

State Street Global Advisors announced a partnership with Bridgewater Associates that will give its private wealth clients access to core alternative strategies. The first joint product is the SPDR Bridgewater All Weather ETF, sub-managed by Bridgewater, which will trade risk parity strategies. Other recent tie-ups include Capital Group with KKR and BlackRock with Partners Group.

With Bitcoin breaking the $100,000 barrier, crypto funds enjoyed a stellar few weeks on the post-Trump bounce. The Bitcoin fund of Pantera Capital has reportedly gained over 130,000% net of fees and expenses since launching in July 2013, when Bitcoin sat at a lowly $65. The Menlo Park manager specialises in cryptocurrencies and blockchain technology.

The All-Party Parliamentary Group published its report on the call for evidence about the FCA on 26 November 2024, the culmination of two and a half years of work, running to 358 pages with testimony from 175 respondents. Findings include a regulator widely seen as incompetent on consumer protection, alarming treatment of whistleblowers and a defective culture driven from the top.

Market Watch 81 reviews FCA observations from supervising the UK MiFID transaction reporting regime, including findings from skilled person reviews under section 166. The regulator is still finding incomplete and inaccurate reports. Weaknesses fall in five interconnecting areas: change management, reporting logic design, data governance, control framework, and governance and resourcing.

Discussion paper DP 24/2, launched on 15 November 2024, seeks feedback on improving the quality of data reported while reducing reporting burdens on market participants. The FCA receives over 7 billion reports each year covering more than 20 million reportable instruments. Prominent in the discussion are potential changes to the RTS 22 fields. Comments remained open until 14 February 2025.

In July 2024 the FCA introduced a third way of paying for research, enabling MiFID investment firms to pay for it jointly with execution services provided certain guardrails are met. It is now proposing to extend this to alternative investment fund managers and UCITS management companies, creating a level playing field between managers of funds and segregated accounts.

HM Treasury committed to changes to the UK MiFID II framework covering commodity derivatives, transaction reporting and organisational requirements. Firm-facing requirements within the MiFID Organisational Regulation will be revoked and replaced in the FCA handbook. The regulator published a consultation paper on 27 November 2024 proposing to retain the current substance with drafting amendments.

The FCA banned Ari Harris from working in financial services on 18 November 2024. Convicted in July 2020 of inflicting grievous bodily harm without intent and sentenced to three years, he and his firm Reeds Motors deliberately failed to inform the regulator of the offending, conviction and custodial sentence, and provided false and misleading information to conceal it.

The FCA published a warning notice on 1 November 2024 stating its intention to take action against Crispin Odey, founder of Odey Asset Management. It considers that he breached Individual Conduct Rule 1 by using his majority shareholding to remove and replace members of the executive committee, frustrating an ongoing disciplinary process into his own conduct.

The SEC filed 583 enforcement actions in fiscal year 2024, a 26% decrease on the previous year, while securing a record $8.2 billion in financial remedies comprising $6.1 billion in disgorgement and prejudgment interest and $2.1 billion in civil penalties. The CFTC filed 58 actions and imposed more than $17.2 billion in fines.

On 21 November 2024 the US District Court for the Northern District of Texas vacated the Dealer Rule of the SEC, holding that it exceeded statutory authority under the Exchange Act. Adopted in February 2024, the rule broadened the definitions of dealer and government securities dealer to include certain private funds and proprietary trading firms, potentially subjecting them to registration.

The SEC announced settled charges against J.P. Morgan Securities and J.P. Morgan Investment Management for misleading disclosures, breaches of fiduciary duty and conflicts of interest. Penalties included $10 million plus $90 million in voluntary payments over the Conduit private funds, $45 million on portfolio management disclosures, and $6 million against the investment management arm.

The National Futures Association announced settled charges against AC Investment Management, a New York based commodity pool operator, over an improper loan from a pool it manages to an affiliated entity. The Business Conduct Committee alleged breaches of Compliance Rules 2-45 and 2-4, the latter for failing to act in the best interests of two managed pools. The firm was fined $100,000.