General Trends

1. Dry Powder: Managers continue to have record amounts of dry powder, but deployment speeds remain relatively low.

2. LPs focused on return of cash: Many allocators want to see managers demonstrate higher DPI (Distribution to Paid-In) through realized exits before being willing to allocate to new funds.   Many allocators question the unrealized valuation of holdings, especially on deals done near the peak of the market.  Further, some allocators are waiting for more distributions that they can recycle into new investments so they limit the amount of callable cash.

3. Secondaries: Given exits through M&A, asset sales, cash out refinances, IPOs and other activity remain low, secondary activity to achieve exits is anticipated to grow.  Many managers seeking to raise new funds will leverage secondary exits on winning portfolio holdings to demonstrate higher DPI.

4. Continuation Funds:  Managers are increasingly seeking options to extend the holding period of their portfolios by pursing continuation funds (aka recapitalizations).  These vehicles offer allocators who have been invested for a long period of time to exit while giving new investors the ability to buy into a mature portfolio with a relatively short investment period to harvest positions.

5. HNWI & FO Distribution: Managers are increasingly seeking to diversify their investor base by raising money from HNWIs and family offices both directly and through channel partners (such as RIAs).  Many institutions already have high alternative allocations, but there’s plenty of room for growth among individual investors.

6. Election: Allocators are apprehensive about the outcome of the upcoming election, and managers are trying to get ahead of investment trends that may result from the election.

7. Geopolitical Tensions: Investment to and from China remain on ice as tensions remain high. Investments into the Middle East are also being put on hold given the increased conflicts in the region.

8. Emerging Market Interest: There's increasing focus on emerging markets, with new regionally-focused funds emerging to address funding gaps.  Valuations in emerging markets are attractive relative to higher valuations today in developed markets, especially the US.  Latin America is back in focus given the focus on near-shoring as corporates shift manufacturing away from China.  Investors are also watching if Javier Milei can shift the region with economic reforms.

Asset Class Specific Trends

Venture Capital

1. Focus on Fundamentals: Investors are prioritizing startups that demonstrate strong unit economics, a clear path to profitability, and efficient capital utilization (growth at all costs is no longer acceptable).

2. AI and Biotech Focus: AI and biotech startups, especially in the US, continue to attract investor interest despite some potential slowdown in AI investments.  It seems that every company raising money these days has some sort of AI angle, and we're still very early in the AI cycle.

3. Clean Energy and Agri-tech: Sectors like clean energy and AgTech are attracting significant venture capital due to their potential for sustainable solutions to global growth.

Private Equity

1. Public-to-Private Transactions: Market dislocations may lead to more public companies going private, especially with small cap companies often remaining valued at a discount to both large cap and private companies.

2. Easing Credit Conditions: Leveraged transactions are becoming more attractive as rates and spreads fall.

Private Credit

1. Booming: The private credit market has been booming, and allocators have deployed a lot of capital to the space.  The space is expected to continue to attract significant capital.

2. Competition: Banks have lost market share to private lenders, and they’re seeking ways to gain back more market share.  Also, the growth in private lenders is increasing competition.

3. Niche Opportunities: We’re seeing high demand for niche lenders in areas such as litigation finance, accessible dwelling units (ADUs) and other areas.

4. Deployment Pressure: With rates expected to drop, managers are seeking to deploy capital in the current environment.  This may cause spreads to drop which would be bullish for equity investors in private equity, real estate, infrastructure and other asset classes.

Infrastructure

1. Infrastructure's Resilience: Infrastructure investments are gaining prominence for their stability across market cycles.

2. Energy Transition Investments: There's significant investment in reconfiguring global energy systems for decarbonization.

3. Digital Infrastructure Growth: Expansion in digital infrastructure, including broadband, cell towers, and data centers, is driving investment globally.

4. AUM Diversification: Large managers, such as BlackRock, are showing that they want to continue diversifying their businesses into areas like infrastructure where they can raise significant capital and add value.

Here is the link to the article on LinkedIn.