Current Trends in Capital Raising Across Asset Classes: From Private Equity to Digital Assets & Hedge Funds

The capital-raising landscape is shifting across all asset classes – from early-stage venture capital to later-stage private equity, infrastructure, private debt, and hedge funds. As 2024 unfolds, it’s essential for both fund managers and investors to stay on top of these evolving trends.

As we often receive inquiries about the current state of the capital raising landscape, we’d like to use this platform to share some top-level trends and developments we’re observing.

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Diversification in Capital Sources

Whilst the established sources for capital raising are still doing the heavy lifting, across all stages of private equity and venture capital we’re seeing that alternative funding structures, e.g. crowdfunding, revenue-based financing, and debt options are becoming established alternatives. This gives companies greater flexibility at every stage of growth.

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Sustainability & Impact: A Key Theme

Investors, including private equity firms and infrastructure funds, are placing greater emphasis on ESG (Environmental, Social, Governance) criteria. There’s increasing demand for funds that support renewable energy, sustainable infrastructure, and socially responsible investments. This is not just a trend – it’s a paradigm shift that’s influencing capital allocation.

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Technology’s Role in Capital Raising

From venture capital to hedge funds, AI and advanced analytics are reshaping the landscape. Deal sourcing, due diligence, and even investment strategies are now driven by data and AI-powered tools, helping investors (and fund managers) make faster, more informed decisions.

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Private Equity

Investor allocations to private equity remain strong, driven by the search for higher returns and portfolio diversification. Despite economic uncertainty, there is also increased interest in some sectors like technology. However, investors have become somewhat more selective, favoring managers with proven track records and focusing on operational improvements and value creation over growth at any cost.

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Infrastructure & Private Debt Growth

Infrastructure funds are benefiting from increased government spending on clean energy, transportation, and digital infrastructure, making this a high-growth area for institutional investors. Similarly, private debt is gaining traction as a key part of diversified portfolios, offering consistent returns in a volatile market. Surprisingly, there are still a lot of (very large) institutional investors that are still to adopt infrastructure and/or private debt in their asset allocation, but we see both asset classes attracting institutional capital.

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Real Estate: Equity vs. Debt

Real estate remains a core asset class for many institutional investors, but it is important to distinguish between real estate equity and real estate debt.

Real Estate Equity is not attracting the same investor attention as during the low-interest rate era. Since we entered a period of economic (and geo-political) uncertainty, raising capital has become more difficult as investors have become more cautious regarding new exposure, rather steering their allocation targets towards the lower end of the range.

On the other hand, Real Estate Debt offers a different kind of exposure. Lending to property owners or developers, providing a steady income stream from interest payments without taking ownership risks, is attracting capital. Helped by rising interest rates, real estate debt has become increasingly attractive as it offers higher yields with potentially less risk compared to equity. Capital is raised from investors seeking consistent cash flow with lower volatility and a safer option than equity.

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Digital Assets: Attention is There

While interest in digital assets like cryptocurrencies and blockchain technology is growing, adoption, in particular amongst institutional investors, remains relatively low, much due to regulatory uncertainties and market volatility. However, investors who are allocating to this space tend to focus on long-term potential in areas like tokenization, decentralized finance (DeFi), and blockchain infrastructure. As the market matures and regulatory clarity improves, institutional adoption is expected to increase.

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Hedge Funds: Discipline attracts Capital

Overall Hedge Funds are attracting investor capital and we see institutional investors across Europe having increased exposure. Hedge funds – and investors – have tended to benefit from the rise in interest rates and dislocations induced by market volatility.  However, some hedge funds are increasingly turning to private equity-style investments to generate alpha. Whilst effective for certain funds, not drifting too far from their core competencies is important.

For hedge funds that maintain their focus on public markets, many are doubling down on their traditional strength of tactical, short-term trades to navigate and benefit from volatility. These funds emphasize flexibility and liquidity and offer investors a more dynamic approach. In uncertain markets, the discipline to avoid untested strategies can be as valuable as expanding into new ones and we have seen it being rewarded by inflows.

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Closing Thoughts:

The capital-raising environment is evolving across multiple sectors and asset classes, and staying agile is more critical than ever.  We will expand on the overview above and take a closer look at specific aspects and individual asset classes in future posts and articles.