Toll Free:
877.456.EFSI (3374)
We’re past the halfway point of 2023, and many will be glad to see the back of H1. The latest data from eVestment suggests that allocators withdrew money from hedge funds for the twelfth consecutive month. Buyout, venture, and secondaries fundraising was also down in Q1 (most of the private markets data providers report with a lag). It’s even worse in real assets.
We all know the reasons. On the hedge fund side, public equities seem to be back (quite remarkably, indeed) and yields on liquid fixed income investments are higher than they have been since before the Global Financial Crisis. On the private side, many LPs are near or at their target private markets allocations. And generally, the uncertain macro environment, and the consequent general level of fear in the market means that capital allocators are slowing down on the dishing out of dollars – or pausing altogether, in some instances.
As an eternal optimist, however, I’d like to offer some encouragement from what we as a firm saw in H1. While not a majority, a decent chunk of our business is in the emerging manager space – we’re fortunate to get referrals from our many partners in the alternative investment industry. In terms of activity in the new launches space, we saw a couple of interesting trends in the first half of 2023.
In private markets, we saw quite a bit of activity in real estate – specifically, multifamily real estate. The commercial RE side is getting all the media coverage at the moment, given the $900bn of commercial property loans due in the next 18 months. But it’s a different story for the residential folks, as a strong job market continues to provide a tailwind for multifamily opportunities.
In hedge funds, we saw long short equity strategies again comprise the bulk of the new funds that came across our desk. That’s probably not a surprise, given that ls/e is one of the most common hedge fund approaches. But given that investors have been pulling money from the strategy for a few years, it’s encouraging to see that plenty of new managers still think there is sufficient opportunity to extract alpha from public equities, despite the resumption of the upward trajectory of the S&P 500 this year.
July 4th is something of an unofficial start to the summer, so I’d expect activity to slow in the next six weeks or so, until school resumes. And then I think that the balance of the year will be quite frantic in terms of new launches. One thing I’ve noticed is that many of the conversations we’ve had and are having this year show that asset management entrepreneurs are bullish about their prospects. That’s not surprising – any entrepreneur should be bullish about their own business, obviously – but they’re much more so than at the beginning of this year, or in the middle of last year. Yes, there is instability and concern in some parts of the alternative investment industry – here’s looking at you, commercial real estate – but overall, the general sentiment is becoming more positive, a welcome trend when compared to the past 18 months.
**********
Anthony D. Mascia is Managing Partner at EFSI. Connect with him on LinkedIn here.
EFSI is an independently owned, SOC-1 compliant, full-service fund administration firm. We provide accounting, reporting, administrative, and capital introduction services to a wide range of alternative investment funds including hedge funds, funds of funds, private equity funds, real estate funds, venture capital funds, and family offices. The center of EFSI’s service incorporates resilient technology and accomplished staff, providing clients a tailor-made service with exhaustive transparency. Give us a call today or reach out to our support team online. We look forward to hearing from you soon.