- Private Market ESG and Impact Funds Perform in Line with Peers “Investing strategies centered on environmental, social, and governance outcomes have faced criticism by those who believe they deliver inferior returns. That criticism has extended to the private markets, which, by their nature, are far more opaque than the public markets. But enough historical performance data now exists for a variety of ESG and impact-related private funds that Preqin, a private markets data-and-analysis firm based in London, has recently published financial benchmarks to track the sector. The initial findings: ESG-related funds perform just as well as other private-market funds.” (Barron’s)
- JPMorgan Expects Spot Ethereum ETFs to Begin Trading ‘Well Ahead of November’ “Trading of recently approved spot Ethereum exchange-traded funds could begin well before November, according to JPMorgan. "We view this ETF approval, and crypto more broadly, as an increasingly political issue ahead of the 2024 U.S. presidential election. As such, we expect trading of the spot ETH ETF to begin well-ahead of November," JPMorgan analysts led by Kenneth Worthington wrote in a report on Friday.” (The Block)
- Hedge Funds Hit by Lack of Private Equity Exits “Private equity’s struggle to return money to clients is hitting hedge funds, which rely on the same pension plans, foundations and endowments for fundraising. Hedge funds seeking to raise money from institutional investors are being rebuffed on the grounds that the institutions lack the cash to give them. The difficulty is at least in part due to a slowdown in distributions that investors have received from private equity funds.” (Financial Times)
- Digital Bonds Becoming Mainstream “The World Bank has issued a digital bond that will be settled with wholesale central bank digital currency showing that tokenization of bonds is becoming mainstream, with transactions of significant size and tenor and the involvement of a number of institutional investors. Amar Amiani, head of the Goldman Sachs digital assets team in EMEA, said on a panel at City Week 2024 on 21 May in London that bonds are furthest ahead in the tokenization of real world assets.” (Markets Media)
- McKinsey Global Private Markets Review 2024: Private Markets in a Slower Era “While the largest funds grew even larger—the largest vehicles on record were raised in buyout, real estate, infrastructure, and private debt in 2023—smaller and newer funds struggled. Fewer than 1,700 funds of less than $1 billion were closed during the year, half as many as closed in 2022 and the fewest of any year since 2012. New manager formation also fell to the lowest level since 2012, with just 651 new firms launched in 2023.” (McKinsey & Company)
- Hamilton Lane’s Hirsch Sees a Tokenized Future for Private Equity “The big picture: This is about how individuals and institutions invest in private equity, rather than the sorts of companies and projects in which private equity invests. Hirsch, speaking at an Axios event in New York on Tuesday, believes that putting LP interests on the blockchain would expand retail investor participation in private equity (i.e., the industry's holy grail), by simplifying both onboarding and secondaries. He also believes that institutions would eventually follow suit, even though to date they've forgone a lot of innovation. "We still get documents faxed to us," Hirsch noted.” (Axios)
- Wall Street Wonders What Happens to the Booming Private Credit Market When You-Know-What Hits the Fan “In January, the Federal Reserve looked at default rates in private credit and how they compare with loans made by traditional banks (leveraged loans and high-yield bonds). Citing KBRA DLD data, the Fed showed, "despite seniority in debt structure, private-credit loans have relatively low recovery rate upon default (or equivalently, exhibit high loss given default) compared to syndicated loans or HY bonds." We obtained updated figures on Thursday from KBRA DLD, which showed more of a mixed picture when it comes to implied recoveries. The average post-default value of a direct loan was about 53.1 percent, below that of syndicated loans, which were 57.5 percent but higher than high-yield bonds, which were 46.3 percent.” (NBC 7 San Diego)
- Transfer Pricing: Insights for the Alternative Investment Industry “In its recent strategic operating plan update, the Internal Revenue Service (“IRS”) delineated its future priorities, notably an enhanced audit focus targeting high-net-worth individuals, multinational corporations, and partnerships. The alternative investment industry should be particularly vigilant as the IRS plans to significantly augment its audit rates by as much as ten times on large-scale, complex partnerships possessing assets in excess of $10 million. The announcement, made on May 2, 2024, by the IRS, was discussed in a previous Marcum article. This development comes against the backdrop of the anticipated increase in IRS revenue generation as a result of the funding provisions within the Inflation Reduction Act (“IRA”). Given historical precedent, the rise in IRS partnership audits will likely lead to an increase in transfer pricing audits.” (Marcum)
- What Franchising Can Teach the NFL About the Impact of Private Equity “The NFL will have to sort through possible conflicts and investing scope. For example, can institutional investors hold equity in both NFL teams and sports gambling companies? How big is ‘too big’ in terms of the presence of a single institutional investor across different NFL teams?” (Entrepreneur)
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