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Are you an optimist or a pessimist?

If you consider yourself the former, and you had gone through the Form D filings in 2024, you would be feeling pretty good about the state of the private fund fundraising space. After all, there were 21 more Form D documents filed with the SEC 

last year (15,248) than there were in 2023 (15,227). That is an increase of 0.00% to two decimal places, but a win is a win, as they say.

If you are a pessimist, then you would look at the aggregate gross asset value (GAV) and tell people that things are bad. And, from a data perspective, you would be right – the total GAV fell from $325.5bn in 2023 to $266.01bn last year, a drop of -18.28%. You would also likely point out that the total GAV was $485.08bn in 2022, so 2024 delivered a second consecutive year of declines.

The Form D provides private fund advisers with four sub-category options for ‘pooled investment funds’ – hedge fund, private equity fund, venture capital fund, and other investment fund.

Each of these categories has evolved into its own industry, managing billions of dollars of investor capital across numerous geographies and asset classes. So, at the filings level, there was a noticeable uptick in activity in the hedge fund and private equity fund categories and on the other side, a decline in venture capital funds , as can be seen in Table 1 below.

Table 1: Number of Filings by Form D Category, 2024 vs 2023

 *Other represents Form D funds that weren't marked as pooled investment funds in Section 4

Alas, it is not the same story at the GAV level. Interestingly, venture capital funds delivered the year’s good news story in terms of total dollars raised, seeing an increase of 27.6% from last year, implying less in number but a much larger average fund size. And the private equity cohort added a couple of percentage points, as shown in Table 2.

Table 2: Aggregate GAV by Form D Category, 2024 vs 2023

*Other represents Form D funds that weren't marked as pooled investment funds in Section 4

The GAV for hedge funds fell significantly, however. In 2023, total GAV was $87.12bn, so hedge funds raised only slightly more than half that last year.

Reasons for the struggles in hedge fund land are well documented. Rightly or wrongly, their returns are often compared to the S&P 500, which in 2024 gained approximately 25%. Add to that the recent higher interest rate environment dampening appetite for products that, on average, delivered 7.99% at the time of writing (according to BarclayHedge) and it becomes clear that the hedge fund industry faces competitive challenges.

The numbers, however, do not paint a perfect picture of the health of fundraising in the space. Many Form D filers submit their document before they have raised any outside assets, so in these instances, the form itself shows $0 in sales. 

So, when these funds file their Form D/A, we would expect AUM to tick up here over the next 12 months – and significantly so.

One thing that won’t be a surprise is the dominance of private equity funds in the league tables. These products are usually larger in size than their hedge fund cousins due to the nature of the strategy, and thus provided the biggest winners again in 2024 (these products also topped the charts in 2023). Of the top 20 filings last year, 16 were private equity, two were venture capital and two were ‘other’.

Table 3: Top Twenty Form D Filings, Jan 1 – Dec 31, 2024, by Gross Asset Value Size

*On occasion, filers may put the same GAV on multiple filings for the same product, which can lead to double counting in certain situations

Whether you are an optimist or a pessimist, there is something for everyone in the Form D data from 2024. And, despite the headline GAV numbers for hedge funds in particular being perhaps a little alarming, there are clearly mitigating circumstances.

But for the private equity and venture capital set, it is difficult to argue that 2024 was not a better year than 2023. And for the private funds industry overall, the back end of last year delivered some good news in the form of reductions in the Federal Funds Rate, which, other things being equal, will hopefully drive some investors to rotate back into private funds. The aforementioned spike in the S&P 500 might also see some investors overweight US equities as well, which might also be a boon for the alternative investment industry.

As always, we will be keeping an eye on developments.

Happy New Year!

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