We provide a round-up of some of the news stories that have got us thinking this week. Please note, some of these sites may require a subscription to view the article.
China-Focused Hedge Funds Set for Investor Influx
Hedge fund investors are looking to Asia for the best opportunities to make money this year and are planning to increase their allocations to managers that know the region, and China in particular. A new survey of pension funds, sovereign wealth funds, endowment plans and other investors with substantial hedge fund holdings showed them hunting for managers able to deploy bread-and-butter hedge fund strategies such as equity long/short investing in Asian markets. The survey found Asia-Pacific displaced Europe as the most sought-after investment region in 2019, with 36% of investors planning to allocate more to managers trading there this year.
Our recently launched 2019 Global Hedge Fund Report provides more detailed investor plans for the year ahead and much more.
Shadow Banking Tops Lending Activity in Private Equity
The rise of shadow banking is evident in lending to private equity deals. Institutional investors have been pouring capital into private debt funds, which have increasingly replaced banks as lenders in the middle market. Assets under management in the private debt industry are expected double to about $1.4tn within the next five years, according to Preqin. Preqin and SEI said in a report this month that regulatory pressures after the 2008 crisis led “banks to curtail corporate lending and adopt a much more conservative approach to origination.”
Source: Institutional Investor
Take a look at the full report, Private Debt: Preparing for the Unknown, produced in collaboration with SEI.
Starbucks Invests $100m in Private Equity Fund
Starbucks is making an interesting foray into private equity for the first time in its history. The Seattle coffee giant is putting cash into a private equity fund, announcing on Wednesday a $100mn investment in the new Valor Siren Ventures Fund managed by Valor Equity Partners. The Chicago-based firm makes growth-stage investments across various industries and in companies such as SpaceX, Bird, Tesla, and a number of food-related start-ups including Eatsa, Sizzling Platter, Wow Bao and Roti Modern Mediterranean. The new fund, which could reach up to $400mn, will also go toward start-ups developing retail-related technologies.
Blackstone Joins KKR and BlackRock in Mexico Private Equity Fundraising
Several of the world’s top private equity managers have quietly raised billions of dollars from Mexican pension funds, known as afores, since new rules were enacted early last year, filings to the Mexican Stock Exchange and a non-public document reviewed by Reuters showed. Blackstone Group has raised $695mn from Mexican pension funds for its first two local private equity funds, filings showed, joining Black Rock and KKR & Co in expanding in Mexico following regulatory changes.
Hedge Funds Doing Their Utmost to Defy Volatility Collapse
Hedge funds focused on the $5.1tn-a-day foreign exchange market are trying to circumvent the dearth of volatility by going farther afield to find an edge. GCI Asset Management is tapping managed futures – often leveraged instruments – for Japanese clients willing to invest a small amount of money for higher returns. Macroscope Capital Ltd., founded by former HSBC managing director Manoj Hemrajani, is investing in gold as an alternative to trading the dollar.
Exclusive: KKR raising first Asia real estate fund, targeting $1.5bn – sources
Global investment powerhouse KKR & Co Inc is raising its first Asia-focused real estate fund, targeting $1.5bn (£1.14bn) as it looks to deepen its real estate portfolio in the region, said people with knowledge of the matter. The New York-headquartered private equity firm is moving towards a first close of the fund late in the second quarter, the people said, declining to be named as the information is confidential. The firm itself will commit about $250mn in capital, and potential investors include sovereign funds and pension funds, they said.
The Venture-Capital Bubble is Going to Burst
Venture capital firms and early-stage companies could see a major fall in their fortunes this year. A combination of inflated valuations, unsophisticated financial models and lack of investor perspective has led to an unsustainable bubble in the start-up sector and the firms that fund it.
The venture capital industry has ballooned over the past decade. Recent research has found that the size of the sector has effectively tripled in just 10 years: in 2008, $53bn was invested in start-ups, and by last year, it was $160bn worldwide. Over that time, deal count has more than doubled.
The 2019 Preqin Global Private Equity & Venture Capital provides detailed analysis on the venture capital industry and the outlook for 2019.
Sovereign wealth funds cut UK investment ahead of Brexit
Deal making in the UK by some of the largest sovereign wealth funds has plummeted because of the growing uncertainty around Brexit, a report from IE Business School in Madrid has revealed. State-backed funds – including Singapore’s GIC and the Canada Pension Plan Investment Board – invested a total of $21bn in the UK in 2017 compared with only $1.8bn last year, said the report, based on the total assets allocation of 91 funds with $8.1tn of assets under management. There were only eight deals by SWFs in the UK last year, compared with 18 a year before.
AI models imperative for the future of asset management
The increasing demand to transfer to an AI enabled model, reduce costs and overcome challenging geopolitical environments, are central issues facing the asset management industry this year. During one session exploring the AI revolution in asset management, the majority of the audience, 78% believed that the potential of AI will give their firms a competitive advantage. Despite this, the asset management industry remains slow to fully embrace AI, with half of the audience stating that a general lack of understanding of AI tools was the main reason to not implement into daily investment decisions.
Private equity firm Ardian closes record €6.1bn infrastructure fund
Paris-based private equity firm Ardian has closed a record €6.1bn infrastructure fund targeting Europe. The fundraising for the Ardian Infrastructure Fund V took less than six months, the firm said. The latest closing raises the infrastructure team’s assets under management to $15bn (€13.2bn) across Europe and the Americas. Investors comprise pension funds, insurance companies, high-net-worth individuals, sovereign wealth funds and financial institutions. There are 125 investors in the fund, of which 30% are new to Ardian.
Source: Financial News
For more infrastructure fundraising figures, take a look at the new Preqin Global Infrastructure Report.