ASC Advisors March 2025 Newsletter
ASC Advisors March Newsletter
Welcome to ASC Advisors’ monthly newsletter, where we provide thoughts around recent developments affecting the alternative investment management industry, as well as provide updates on our firm and team.
Hedge Fund Allocations
Amidst strong performance, hedge funds appear to be back in favor with institutional investors. According to a BNP Paribas analysis, more than 60% of allocators are now set to increase their hedge fund portfolio this year.
The same analysis reports that most investors are looking to implement this growth within long/short equity (76%), multi-strategy (44%), quant (38%), and macro (37%). Hedge funds continue to be attractive as market conditions play out and certain areas that have seen significant interest continue to grow.
As the new administration’s policies are implemented and global markets shift, media and managers will be watching closely as to how LPs approach allocations to hedge funds, private equity, private credit and other alternative asset classes.
M&A
Dealmakers had a high level of enthusiasm for deal volume heading into 2025 in light of the new administration shift, hope for lower interest rates, and decreased market volatility at the time.
As we enter March, however, those sentiments have tempered and been replaced with higher uncertainty for the rest of the year. With fast moving changes stemming from tariffs, DOGE and constantly evolving foreign policy, US dealmaking realized its slowest start to a year in a decade.
However, anticipation for deal volume in the latter half of the year remains, due in part to the new administration’s overall pro-business agenda and decreased regulatory scrutiny. Larger transactions are expected to be approved and advancements in AI-- a priority for the administration and Big Tech--are expected to thrive .
If M&A regains its strength and trend upwards, sectors that might benefit over the next few quarters include: generative AI, biotech and pharmaceuticals, restructuring and distressed investments, and cybersecurity.
While the IPO market remains quiet in the near-term, another area realizing a resurgence is SPACs, as established management teams enter into a new cycle of fund raising. As with M&A, there is an expectation that IPO markets will thaw later in the year leading to an increase in private equity exits and sponsor-backed sales.
13D/13G Updates From the SEC
Despite the wait and see pattern in certain areas of the market resulting from new administrations, regulatory changes continue to roll on. We recently published a letter addressing the U.K.’s Financial Conduct Authority’s (FCA) “Name and Shame” proposal, which would enable the regulatory agency to announce the initiation of an investigation prior to any findings. In it, we highlight our concerns about the ruling’s implications for investors, including pensions, foundations, endowments, family offices and government entities, as well as investment managers and their employees. You can read the full letter here.
In the U.S., the SEC published new guidance on 13G/13D filings, which requires investors engaging with issuers on ESG and other matters to file a 13D rather than a 13G. This guidance has caused confusion and resulted in managers pausing corporate meetings in efforts to avoid violations. According to Pensions & Investments, this could have an impact on dynamics between companies and shareholders.
If put into law, the policy would put new burdens on managers currently relying on the Schedule 13G form to report major holdings and potentially hinder constructive engagement between issuers and managers given preconceived perceptions around 13D filers. Depending on how this is handled by the SEC and whether law is implemented, it could impact how passive and activist shareholders engage with companies in ongoing investments and activism campaigns moving forward.
Energy Transition
Investment in the energy transition reached all time highs in 2024, though the energy transition sector, particularly in renewables, may face challenges due to shifts in political and regulatory environments.
Under the current administration, some of the large wind projects and other areas in the green-energy industry are stalling and investors are evaluating a broader range of energy investments. With a potential boost in domestic oil and gas production, we expect significant interest from media as investors and LPs respond to the shifting landscape.
While there may be renewed interest in traditional energy opportunities relative to recent years in the near-term, investor interest in the ongoing energy transition remains high, as new entrants in the space continue to emerge. Specifically, around 40% of energy transition GPs are new players and more than 70% are operating under their first or second fund.
If you are interested in reading the entire report or discussing these media changes and topics of focus, please let us know. We look forward to hearing from you.
