ASC Advisors January 2025 Newsletter
As the year kicks off with a new administration, ASC studied several areas that we expect to impact the investment management industry. The areas we covered include monetary policy, crypto, M&A and the regulatory environment.
Global, Fiscal and Monetary Policy
President-Elect Trump’s second administration is expected to bring significant change in global, fiscal and monetary policy. Alternative investment managers and investors have been predicting and preparing for the impact of the incoming policies, resulting in heightened volatility in certain sectors over the last several months as cabinet appointments have been announced and other changes made. According to recent coverage and commentary from several macro-managers, investors are expecting continued geopolitical unrest and readying for more volatility in the year ahead as changes take place and policy shifts are implemented.
One area that has been heavily followed since the election was how Trump’s planned use of tariffs will impact imports, global trade and prices in the U.S. With several countries engaging with the President-elect ahead of his inauguration, what these tariffs look like and how and when they will be implemented will determine the direction of market segments, creating volatility and opportunities for investors moving forward. Trump’s approach to energy is another area expected to see a shift in approach, as a departure from ESG-related investments continues to take hold in certain geographies. If Trump maintains focus on an energy-independent U.S., the global fossil fuel trade could shift as investments in certain renewable energy sources fall back.
Leading up to and following January 20, the media to be hyper-focused on the policies implemented by Trump’s administration and how markets and investors react, and we expect reporters to look towards leading hedge fund and private equity investors and advisors for insights into how the industry is looking to play national and global economic shifts.
Relevant Coverage:
Crypto Outlook
With the upcoming administration carrying with it increased pro-crypto sentiment and the resulting jump in crypto prices, there has been an uptick in managers taking a second look at crypto. As reported by FundFire, additional asset managers are expected to begin offering cryptocurrency products to their institutional investor base, due in part to the anticipated favorable crypto environment resulting from changes in leadership within the regulatory space. SEC chair nominee Paul Atkin’s rulemaking initiatives are expected to “push the envelope” on how crypto is viewed in terms of traditional investment classes, which could fuel broader adoption and utility for crypto assets moving forward. That, combined with comments from Trump about building a federal reserve of bitcoin, has driven prices up and created bullish sentiment heading in 2025.
Hedge funds have increased their positions in the space as well, with Bloomberg reporting that nearly half of traditional hedge funds have explored or invested in crypto. Specifically, in October, the publication reported that there had been a 29% increase in traditional hedge funds’ exposure to crypto, a number we would expect to have grown noticeably larger since the election.
As firms across the industry look to increasingly expand their offerings, ASC can work with you to announce new strategies to help garner the attention of prospective investors through exclusive placements with industry reporters or distributing any announcement as a press release. Further, as the role of crypto becomes more prevalent and clear, discussing bull and bear cases around the class will be covered closely by the media and followed intently by the alternative investment market.
Relevant Coverage:
M&A and IPO Market
The uncertainty associated with external pressures, including the election and geopolitical tensions, led to another down-year for M&A in 2024, however due at least partly to the new administration's pro-business stance, bankers anticipate global deal volumes to exceed $4 trillion in 2025, marking the highest levels in four years, with an accompanying surge in mega deals. President-elect Donald Trump’s promises of reduced regulation and lower corporate taxes, alongside his appointment of Andrew Ferguson as the Federal Trade Commission chair, are expected to ease scrutiny of large corporate mergers, in regards to anti-trust. With corporate balance sheets holding trillions in unspent capital, dealmaking activity is poised for significant growth.
Private equity is projected to have a strong year, supported by improved financing conditions and a potential resurgence of initial public offerings (IPOs). After sluggish years for mergers, acquisitions, and public exits in 2023 and 2024, PE firms are leveraging strategies like sponsor-to-sponsor deals, minority stake sales, and continuation fund structures to return capital to investors. A potential revival of IPOs would enable PE firms to exit multi-billion-dollar portfolio companies, resolving valuation disagreements that stymied activity in previous years and driving M&A activity as firms look to deploy substantial reserves of "dry powder.” This uptick in M&A will also benefit private credit firms by creating additional opportunities around increased LBO activity.
In the venture capital space, large tech companies increasingly entering public markets and increased deal flow could enhance exit values and improve liquidity for limited partners, enabling reinvestment in new opportunities. The increase in deal flow is also likely to spur a rise in capital returns to LPs through traditional exits while continuing to benefit the secondary market, which is poised to thrive alongside broader M&A activity.
ASC looks forward to working with PE and VC managers around announcing key exits and platform or add-on acquisitions, as well as with public market investors around specific deals and any activist campaigns that may result from proposed transaction announcements.
Relevant Coverage:
Regulatory Environment
Under the Trump administration, the SEC is set for a major shift in its regulatory approach with the appointment of Paul Atkins as Chair to replace Gary Gensler. Gensler’s tenure was marked by a rigorous focus on the private fund industry and a “regulation by enforcement” philosophy, which critics argue created uncertainty for market participants. In contrast, Atkins is anticipated to favor a more hands-off regulatory approach in line with his reaction to efforts to regulate hedge funds post-financial crisis, when he was an SEC Commissioner. The shift signals potential relief for private funds, and could lead to the shelving or substantial revision of contentious proposals, such as the predictive data analytics rule and the client asset safeguarding rule. Pending legislation, including the 13f-2/Form SHO short-selling disclosure rule, will remain in place, however ongoing litigation around those proposals may delay or reshape implementation, which was originally scheduled for early 2025.
Despite the anticipated regulatory softening, certain areas will remain under scrutiny. SEC examiners are likely to prioritize enforcement of the marketing rule, conflicts of interest, cybersecurity, data privacy, and the integration of artificial intelligence in investment strategies. Meanwhile, rulemaking may pivot towards expanding retail investor access to private markets through professional credentialing. The industry is also lobbying the administration to preserve favorable tax treatment of carried interest. Additionally, with the new CFTC chair yet to be announced, there is speculation about whether the SEC and CFTC will collaborate to establish clearer regulations for cryptocurrencies, addressing a long-standing gap in oversight.
ASC monitors the regulatory environment overseeing the alternative investment space closely, often engaging with industry trade organizations and reporters to weigh-in on key proposals and the impact they may have on managers both in the U.S. and abroad.
Relevant Coverage:
Congratulations Kylie!
We are pleased to announce that Kylie Souder has been promoted from Senior Associate to Director, effective January 1, 2025.
Kylie serves as a valued strategic advisor to our clients. She joined ASC Advisors in 2023, bringing more than six years of strategic communications experience to the firm.
Please join us in congratulating her on her promotion!
