Tokenization Opens Alts to All, Blackstone & BlackRock Explore Fee-Based Models and Hedge Funds Reap Returns in this Week's Edition...
Take a Lap Around the Industry
Tech's Top 7 Reclaim Trillion-Dollar Status in Market Rally (WSJ)
SEC Cracks Down on SPAC Conflicts of Interest with New Rules (Bloomberg)
J&J Reaches $700M Settlement Over Talc Powder Lawsuits (CNBC)
Walgreens Looks to Offload Shields Health in Multi-Billion Dollar Deal (Bloomberg)
Revolutionizing Finance: How Blockchain Tokenization Opens Alternative Investments to All
Tokenization is beginning to be utilized in alternative investments and may bring about changes to the financial sector. Traditionally, alternative assets like private equity and hedge funds have been largely inaccessible to individual investors due to high entry costs and complex management. However, tokenization, leveraging blockchain technology, is poised to democratize this sector by simplifying and streamlining investment processes. This could potentially unlock a massive $400B plus opportunity, as it not only broadens access for individuals but also enhances liquidity and offers more transparent, customizable investment options. The shift towards tokenization signifies a crucial evolution in the alternative investments market, promising to redefine investment strategies for high-net-worth individuals and reshape the asset management landscape.
"Given the lack of common infrastructure and standards among such funds, alternatives typically have been more cumbersome to manage from an operational perspective. Alternative asset managers thus often only find it economically attractive to accept a limited number of large-ticket investments (more than $5 million) into their funds. That floor essentially prevents many individual investors from accessing these products."
Bain & Company
Private Funding Pulse Check
UpSmith, a company building technology to maximize workforce productivity, has secured $5M in a Seed funding round joined by Dallas, TX-based Crow Holdings
In a recent Series A round, North Island LLC participated in a $23M investment in Polymer Labs, an Ethereum Layer 2 Developer building a universal modular Inter-Blockchain Communication (IBC) router chain and expanding the IBC network
Elkstone Family Office has participated in a $3M Seed funding round for Lative, a sales performance, efficiency and planning platform
Segnalita Ventures and Wille Finance have engaged in a $95M Series C investment in Instagrid, a Germany-based portable power system company
Blackstone and BlackRock Explore Fee-Based Revenue Amid Industry Evolution
Two of the world's largest asset managers, Blackstone and BlackRock, are making strategic moves to strengthen their financial positions in the face of market volatility. Blackstone recently raised $1.3B for its first retail private equity fund, targeting individual investors with at least $5M to invest. Meanwhile, BlackRock is acquiring infrastructure investment firm Global Infrastructure Partners for $12.5B, representing a major expansion into alternative investments. These actions reflect a broader industry shift toward fee-based revenue streams rather than more inconsistent performance-based earnings. Asset managers are increasingly catering to high-net-worth clients and institutions looking for steady returns. For Blackstone and BlackRock, the focus is on building resilient, diversified businesses that can withstand unpredictable markets. Their push into private markets and alternatives highlights the demand for predictable revenues over outsized performance gains. As valuations place greater value on predictable management fees, major players like Blackstone and BlackRock are positioning themselves for steadier, long-term growth.
"Institutional investors are fed up by private equity firms that continue to ask for more money, with few exits in sight. Some sovereign wealth funds and state pension providers have told the managers that they want their money back before committing to upcoming raises. Recently, a few are creating so-called evergreen funds. They are more difficult to manage, but allow investors to redeem more easily."
Shuli Ren, Bloomberg
Global Hedge Funds Triumph in 2023 with Tripled Client Gains
The world's top hedge funds delivered standout returns for investors in 2023, regaining their footing after a rocky 2022. According to new data from LCH Investments, the 20 best-performing hedge funds generated $67B in gains last year, roughly triple their 2022 amount. Several factors drove the standout year, including a sharp rebound in global markets and timely stock picking by fund managers. The data reveals a wide performance gap in the industry though, with multi-strategy giants like Citadel, Millennium Management, and D.E. Shaw dominating the rankings. These firms benefited from their scale, leverage, and ability to attract top talent. The broader hedge fund space saw more modest 6.4% average returns in 2023. While some funds like Bridgewater Associates lost money last year, others including TCI Fund Management and Pershing Square scored double-digit returns, underscoring the variability across strategies and managers. After a downturn in 2022, last year marked a return to form for many leading hedge funds.
"Last year's strong industry performance followed a weak 2022, when at least eight of the top 20 hedge funds lost money on market turbulence sparked by the war in Ukraine and Federal Reserve interest rate hikes aimed at taming inflation."
Carolina Mandl, Reuters
Twin Bridge Goes All In on Middle Market Private Equity
Twin Bridge Capital Partners, a Chicago-based private equity firm, is bullish on investments in the middle market heading into 2024 despite broader industry challenges. Twin Bridge co-founder Brian Gallagher sees "enormous opportunity" in the segment composed of smaller companies, citing attractive risk-return dynamics, less competition, and insulation from debt market volatility. With thousands of companies fitting the middle-market profile, Gallagher argues the space represents the backbone of the U.S. economy. He advises private equity firms to adopt a programmatic approach to investor relations, conducting regular check-ins rather than solely engaging during fundraising. This constant engagement builds strong limited partner relationships. Overall, Twin Bridge's middle-market focus stems from a belief that the segment offers more predictable outcomes and increased growth opportunities.
"You can’t count on robust exits until they happen. There will continue to be very judicious management of portfolios. This trend of LPs trying to prune names from their portfolios so they can have a little more concentration while leaving room for selective new managers [will remain a challenge]. I think people will continue to be cautious until markets definitively prove otherwise."
MAI Capital Management acquired WaterStone Investment Counsel, an investment management firm founded in 1995 by Mark Roberts and Don Brosz
WaterStone is headquartered in Cincinnati and has $144M in client assets under management
WaterStone will join MAI and adopt its brand identity, gaining access to MAI's HR, operations, and marketing resources
Mark Roberts and Don Brosz of WaterStone will become Senior Wealth Advisors at MAI, working with Ed Kuresman's team (BW)
Written by:
Andrew Popp | Sr. Research Associate
FINTRX delivers an industry-leading suite of private wealth data and research solutions to the alternative investment space and private capital markets. Engineered to help clients identify and access family office and RIA capital intuitively, the FINTRX platform ensures accurate and updated data and research on 850,000+ private wealth records globally. To subscribe to our newsletter and see previous versions click below.
