ASC Advisors October 2024 Newsletter
Succession in the Spotlight
With Two Sigma’s co-founders announcing that they would jointly step down at the end of August and Steve Cohen stepping back from the trading floor at Point72, the importance of succession planning within the investment management industry was thrust into the spotlight.
Executing a successful transition takes years of careful planning and transparency with LPs, staff, counterparties and other key constituents. When the final announcement comes, everyone involved should know that the well-planned succession plan has been executed. Further, a collaborative and planned out process helps internally, providing investment and operation teams comfort in understanding the vision going forward.
We have helped manage some of the most high-profile successions in the hedge fund space and are in regular communication with clients about how to navigate through the internal process of positioning key new hires, promotions and personnel developments appropriately. To ensure a successful transition, we recommend that you think about the process early and establish a sequence of developments built on consistent messaging to ensure a seamless transition.
Private Credit Fundraising and Outlook
With fundraising in the private credit space declining for the third straight year from 2021 record highs, the need for managers to differentiate their approach, experience and track record is becoming more and more critical, both publicly and in private market and communications materials provided to LPs.
Despite the decline from those highs, the asset class continues to be of particular interest among institutional investors, including pension funds and insurers, especially in light of elevated returns associated with higher interest rates broadly. If rates continue to decline, as they are expected to over the coming 12 months, how the industry is able to maintain returns and compete with banks will be of interest to investors, borrowers and media alike.
We work with a variety of private credit firms and have seen how specific strategies within the broader Private Credit arena can diverge in terms of target companies, deal structuring and origination, resiliency to market movements and approach. Regardless of firm structure and objectives, shaping messaging to clearly articulate the approach, opportunity set and outlook can help put managers in front of important allocators and deal sources.
In addition to refining investor materials, as reporters cover the ongoing evolution of the private credit space, including how firms and banks are competing and collaborating, we have found significant reporter interest in listening to how managers are navigating and taking advantage of these dynamics – either on the record or on background – as they write trend and outlook stories at major financial and industry trade publications alike.
Relevant Coverage:
The Role of the Secondary Market
The ongoing hunt for liquidity by private equity investors has contributed to the recent rise in secondary activity, culminating with record transaction value in the space through the first half of this year. While liquidity is one factor, the asset class has become of interest more widely to LPs – both traditional participants and new entrants – due to attractive returns and a broad opportunity set.
Both private equity firms and secondary investors benefit from additional attention given to the space as strong returns, asset selection and activity all contribute to a bullish outlook for the market moving forward. Broadly undercapitalized, the secondary market provides unique opportunities for those looking to deploy capital, and as institutions become better equipped to take advantage of it, the expectation is for a continued rise in deal completion and capital deployment in the space.
Private equity GPs and secondary firms alike looking to take advantage of these market dynamics, either as potential investors, buyers of assets, executors of continuation vehicles or other alternatives, have an opportunity to position themselves as leaders as the market continues to expand. As more and more participants enter the market – both as LPs and GPs – investor, media and other public relations initiatives can help establish a reputation as a thought leader and communicate the strong value proposition behind both LP and GP driven secondary transactions.
Relevant Coverage:
Central Banks Signal Era of Easing?
Recent interest rate cuts at several central banks, including the Federal Reserve and Bank of England, have triggered movements in the markets as managers and other market participants speculate on how monetary policy will be managed in the coming quarters heading into and through the upcoming election in the U.S.
With four additional potential cuts projected in 2025, these actions will remain a major focal point of key financial publications and reporters as the implications of lower rates can have a significant impact on public, private and real asset classes. We have been working with our clients across different strategies to help position firms as thought leaders, connecting with influential reporters to provide insights into market developments, opportunities and outlook.
The 50bp cut by the Fed raises important questions about the health of the economy, and the FT and WSJ (among others) covered the Fed’s shift from inflation to unemployment. How the job market plays out and the impact of interest changes will remain front and center in market coverage moving forward.
Relevant Coverage:
