Peter Hughes, Founder and CEO of Apex Group
As we embark on 2024, we embrace the digital transformation and automation of our processes to be the fastest innovator in our industry. Regulatory changes, especially those related to operational resilience, are constantly evolving in different regions and we expect this to continue. Agility is essential to adapt to these changes and thrive in our dynamic environment. Our recent strategic lead investment in Tokeny, an enterprise-grade tokenisation solutions provider, solidifies our dedication to driving the digital revolution of the financial industry. By leveraging Tokeny’s expertise, we are able to offer our unique single-source solution for tokenisation and spearhead the digital revolution of finance.
Our clients show great interest in our connected approach to technology - linking their data from investment to investor. To leverage our global connectivity and experience to create value for our clients, the Apex Invest platform and flagship events provide a powerful capital-raising solution that empowers both fund managers and allocators to build connections and identify investment opportunities.
We continue to observe investor demands for greater liquidity in private market assets, and we have focused on solutions that deliver this in 2023. The trend towards Hybrid funds and more evergreen structures reflects this shift. The ability to adapt to emerging opportunities will remain a key factor for investment success in 2024.
Valerie Mantot- Groene, Regional Managing Director- ASEAN
Early 2024 will be defined by the continuation of several trends which dominated the second half of 2023. On the macroeconomic front, high interest rates, geopolitical uncertainty, and economic malaise have all weighed on the asset management industry. Market volatility also impacted fund performance in 2023 and fundraising challenges have impacted the launch of new funds. A lack of exit and M&A opportunities is also impacting on the transactions' volume and availability of liquidity. All of this has been further compounded by a talent crunch across the asset management and asset servicing industry.
In terms of fund preference trends, Private Credit and Real Estate have recently proven the most popular asset classes, with Venture Capital being less popular. Japan, South Korea, Australia, and Vietnam have been the main beneficiaries of investments allocations. in 2024, Private Credit and Real Estate will remain the most popular assets classes and Japan, South Korea, Australia, and Vietnam will continue to be the main beneficiaries of investments allocations.
We have also seen a preference emerge for institutional limited partner funds with solid track records to allocate capital to asset managers. Co-investments fund structures and direct investment type structures are also growing in popularity. Another trend we expect to see continuing in 2024 is toward the outsourcing of operation and finance functions for cost efficiency and resource management purposes.
2024 will see fundraising challenges continue to impact start up managers. More positively however, given the growing pressure following 2023, we are likely to see a pick-up in exit and M&A activity, specifically in private equity. We will also see an increase in innovative structures and programs to facilitate the occurrence of liquidity events and access to liquidity. With tighter margins abounding, there will be a push towards operational and cost efficiency and through automation and outsourcing.
The new year will also see direct allocation by institutional LPs increasing, greater levels of activity on secondary markets (at LP level and Asset level) and onshoring of structures to Hong Kong and Singapore and consolidation of a number of structures for deals and investments.
Emma Bickerstaffe, Managing Director, ESG & Sustainability
Environmental, social and governance (“ESG”) regulation was firmly in the spotlight in the second half of 2023 as the political debate surrounding ESG continued. In US markets predominantly, the consideration of ESG factors in investment decision making faced scrutiny with some questioning whether the approach was driven by a political agenda rather than financial performance and whether in fact it negatively impacted investor returns, hindered the wider economy, and discouraged innovation and growth. In Europe the first Sustainable Finance Disclosure Regulation (“SFDR”) periodic disclosure landed which shone a light on the challenges and effectiveness of the regulation which has triggered a broad review and led to a similar ESG backlash in Europe. Coupled with this we saw new ESG related regulation land, particularly in the UK and European markets, the most notable being the UK Sustainability Disclosure Requirements (“SDR”) and the EU’s Corporate Sustainability Reporting Directive (“CSRD”). This has undoubtedly resulted in regulatory demands taking over from investor pressure as the main driver for action for many firms and has resulted in greater demand for Apex ESG regulatory services.
In H1 2024, we expect an increased focus on carbon and climate commitments, with much welcome challenges on scope, level of detail, and quality expectations. We expect this to result in demand for the Apex carbon services including measurement, verification, and reduction planning. CSRD will become a reality for many large corporates as they frantically decide how to ready themselves for reporting in 2025 – these activities will include training, double materiality assessments, and an understanding of gaps they need to address in order to complete the reporting templates in future. After 18 months of depressed M&A activity we also expect an increase in H1 2024. This will be driven by significant dry powder in private equity funds that needs to be invested, and the need for these funds to assess existing portfolio investments to return capital to LPs. From an ESG standpoint we expect this to result in an uptick in due diligence activity, and greater focus on pre-exit sustainability plans.