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2023/2024 Themes in Review: The Chase for Fundraising Dollars & The Race for Talent

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As we wrap up our data collection for 2023, we wanted to look back at a few of the themes that defined the year. We have seen how the toughest fundraising environment since the Global Financial Crisis has touched all aspects of the alternative asset management universe. We have seen the impacts across compensation for top talent, hiring trends across asset classes from credit to infrastructure, the movement for DEI representation, and feverish M&A activity as more players rush to acquire alternatives strategies. We are watching the market closely to see how these themes will play out in 2024. 

Here are the key headlines that have emanated from our data.

Compensation packages linked to carry are the highest we’ve ever seen

A few years ago, we began noticing an increasing trend of marketing candidates negotiating compensation packages that included a potential bonus linked to the amount of carry earned by the fund manager. These packages made perfect sense at the time – after all, a high-quality marketer is worth his or her weight in gold if they’re able to consistently raise billions in capital. However, as many private funds posted high returns in recent years, these compensation packages have turned into more than some GPs are willing to chew.

Over the last few months, we’ve worked with several alternative investment firms that wanted to execute complex buy-out deals, especially when a marketer who is due millions in compensation wants to switch to another firm. These buy-out packages are often spread out over several years and are contingent on the candidate hitting certain fundraising targets. This mirroring of vesting schedules allows both the firm and the marketer to keep their interests aligned.

We expect to see many more buy-out deals in 2024 as the talent landscape shifts once again as M&A transactions increase.

Credit strategies still hot but smaller firms face obstacles

Another sector that enjoyed a strong 2023 was private credit, with a record 540 marketing moves. This is up on what was also a strong 2022 with 518 moves. These data points reinforce my anecdotal observations from conversations with alts firms around the world, many of whom have shared their need to hire more credit professionals.

To help ease the imbalance between the demand and supply of credit specialists, we expect to see a lot more consolidation as the investment behemoths buy up smaller credit firms allowing these firms access to a vast optionality that comes with much larger distribution platforms offering a plethora of LP channels such as private wealth, intermediary, opaque multi-family offices, with long dated track records of raising from the ME and sovereign wealth funds.

In the interim, these large multi asset funds are offering aggressive compensation packages to retain top performers to try to turn the tide in their favor. Another trend we are witnessing is credit funds tapping into structured credit desks on the sell side for either capital markets and or buy side distribution roles as the search for credit specialist talent continues to heat up. We are already tracking moves to this effect in Q1 this year. 

As a side note, private equity hiring continued to remain robust with 770 moves in 2023, a slight uptick from the 754 moves in 2022.

Difficult fundraising environment has led to surge in M&A activity

Much has already been written about the challenging fundraising environment (including by Jensen Partners in our Q3 2023 newsletter), so we will not repeat those points here other than to emphasize that alts firms are not resting on their laurels. Instead, some of the biggest players have gone on an acquisition spree, as highlighted by the recent string of M&A deals..

As David Layton, Chief Executive of Partners Group, aptly describes, the alternatives industry is witnessing a "new phase of maturation and consolidation." Layton goes further to say that “it is really only the large players that can withstand the forces reshaping the private markets industry. We could see the current 11,000 or so industry participants shrink to as few as 100 next-generation platforms that matter over the next decade."

The mega-firms and the Private Fund Groups seem to be the big winners of all this consolidation, thanks in part to how both are comfortable pivoting to new markets or new types of investors. For example, Houlihan Lokey's acquisition of Triago in December, underscores a significant expansion of its Private Funds Group, positioning the firm as a top-tier private capital advisor.

Investors in the Middle East and Asia have been ramping up their allocations to alternatives over the last 12 months, reflecting a growing interest in these investment avenues within the regions. This trend is evident from deals such as EQT's recent merger with Baring Private Equity Asia, forming a global leader in active ownership strategies and underscoring EQT's commitment to seizing opportunities in Asia's burgeoning market.

Following this trend, a series of prominent mergers and acquisitions have not only reshaped but also redefined the landscape of the alternative asset management industry. For instance, TPG's acquisition of Angelo Gordon stands as a testament to their strategic vision, consolidating their market position and fortifying their presence across the alternatives landscape. Similarly, Wendel's strategic acquisition of IK Partners signifies a deliberate move towards expanding their footprint in third-party asset management.

We are continuing to see a significant amount of consolidation in Q1, and we expect to continue to see this trend play out in 2024. Amundi sealed the deal to acquire Swiss asset manager Alpha Associates. These moves highlight a clear trend towards consolidation and strategic positioning, reflecting the ongoing evolution of the industry. LP First Capital's acquisition of Northpoint Asset Management, one of the top 10 SFR property managers, further underscores a dynamic shift towards consolidation, reflecting the evolving nature of the industry.

Time will tell if the fundraising environment in Western Europe and the U.S. picks up as inflationary pressures ease and as investors get clarity on several important upcoming elections and regulatory decisions.

Infrastructure strategies still niche but attracting strong demand

One sector that was seemingly unfazed by the speed bump in fundraising was infrastructure, which was our clear winner for the year in terms of increase in hiring activity year over year. For all of 2023, we tracked a record high of 175 moves to and from infra firms, compared to 89 moves the previous year. So, while infra is still a niche sector overall, infra strategies are certainly enjoying a hot streak right now. Case in point – BlackRock’s recent $12.5 billion acquisition of Global Infrastructure Partners, one of the largest independent infrastructure investors in the world with $100 billion in AUM. Moreover, Investcorp made a notable move by entering the global infrastructure asset class through an investment in Corsair’s Infrastructure Business. According to the release, the specific amount of the investment was not disclosed, but it underscores Investcorp's commitment to expanding its presence in infrastructure.

Additionally, General Atlantic announced the acquisition of Actis, creating a diversified, global investment platform with approximately $96 billion in combined assets under management (“AUM”). These deals highlight the continued growth and attractiveness of infrastructure investments in the current market. Furthermore, KKR recently launched a $3 billion public takeover offer for Encavis, a German electricity and energy producer, marking a significant move in the renewable energy sector. Lastly, Commerzbank's acquisition of a majority stake in Aquila Capital Investmentgesellschaft and Vontobel's agreement to acquire a significant minority stake in Ancala Partners  further demonstrate the growing interest and investment activity in the infrastructure and sustainability sectors, reflecting the broader trend of strategic partnerships and consolidation within the alternative investment industry.

We would not be surprised to see more infrastructure specialists get snapped up by the larger alts firms as the industry pivots to what is a growing area of interest for institutional investors.

DEI hiring still important, especially at highest levels

We continue to see slow but steady progress in gender representation across the alternatives spectrum. In the macro view, the percentage of women versus men hired year over year has been steadily increasing, reaching 41.18% in 2023, up from 40.78% in 2022 and 38.98% in 2021. Specifically, we see the biggest increase in gender representation year over year in the infrastructure space, with a 49% jump from 2022 to 2023 of moves by women professionals. In this challenging fundraising environment, these gains are a good sign that the industry is still taking DEI seriously.

We are also pleased to see a record number of women and minority-owned firms launch new funds. According to a study by Fairview Capital, more than 400 women and minority-owned private equity firms were raising capital in 2023. Judging by recent trends, we would expect many of these firms to work with similarly diverse business development professionals.

We remain optimistic about strength and potential of the alternative investment industry as we head into the middle of 2024. While challenges remain, these themes show that alts investors are adept at responding to industry trends and macroeconomic forces. We will have more to share on the evolving alts landscape in our next newsletter, so please stay tuned!

Sincerely,

Sasha Jensen

Data Graphs

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Jensen Partners stands as the leading distribution executive search firm, dedicated to diversity, equity and inclusion, while leveraging technology driven solutions. With a track record of 26 awards, the firm is widely recognized for their exceptional service, data-driven methodologies and commitment to building strong partnerships with both clients and candidates.

Outstanding Achievements:

  • 5-time winner, Most recently, Private Equity Wire's 2023 US Awards for "Best Recruitment Company in IR & Asset Raising"
  • 3-time winner, Most recently, Private Equity Wire's 2023 European Awards for "Best Recruitment Company in IR & Asset Raising"
  • Featured in Fast Company's "World's Most Innovative Companies 2023: Top 10 Small Companies"
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