As the third quarter of 2024 wound down, Proskauer’s Private Funds group held its annual Fund in Focus conference. The event brought together GPs, LPs, advisors and other stake holders for a day of thought leadership and the opportunity to connect with new and familiar faces.

Across eight different sessions, Proskauer partners spoke with big voices in the funds industry, covering everything from regulatory and tax updates, to trends in fund finance, to the outlook in secondaries and the sector more broadly. The day also featured a very special fireside chat with Stanford researcher, Mohammad Rasouli, whose research focuses specifically on AI in the private funds space.

Perhaps the biggest takeaway from the day for fund managers: creative strategies will be the differentiator. Competition is heating up and fund managers have had to start thinking about raising and deploying cash in new ways, and that will only increase in 2025 as fundraising picks up. In the next 18 months, expect to see new asset classes, strategies, and players in unexpected regions. This includes co-investments, strategic partnerships, secondaries and GP-stakes.

Here are a few other key takeaways from the day:

1. The Retail Opportunity: Retail and high-net-worth investors are showing an increased interest in private markets, but fragmented client bases, demand for quicker returns and lack of resources may prove difficult. For those managers who can solve these hurdles, the alternative wealth channel may offer an untapped exciting opportunity.
2. Secondaries Will Only Get Bigger: Over the past 18 months, secondaries funds have emerged as a popular strategy for many GPs and LPs thanks to the ability to weather macro-economic factors and a build-up of capital. In the coming year, expect the market to only grow as both new and incumbent players seek to take advantage of its stability. It will be the sizable market players who can write big checks and execute deals quickly that have the advantage.
3. AI is not one-size-fits-all: AI can help fund managers make significant efficiency improvements, but what works for one manager may not work for all. Our keynote speaker, Mohammad Rasouli, noted that to make the most of the technology, fund managers need to customize it to their firm’s needs and ensure integration into the workflow.
4. Fund Financing Gets a New Look: Tools such as NAV Facilities and Rated Note Feeders are becoming more popular as managers seek to be more adaptable to market conditions. Some sponsors have added flexibility in newer vintages to allow for NAV Facilities so that they can use it down the road if desired. Also, Rated Note Feeder structures offer investors a dramatically lower capital charge.
5. Specialization Comes to Secondaries: It’s clear that there is tremendous growth opportunity in the secondary market and as competition grows, expect GPs to specialize their strategy as they seek specific return profiles or to stand out from the crowd. Private credit, sports and infrastructure are three sectors in particular to watch.
6. AI is a tool for fund managers, not a replacement: There are many exciting developments and uses for AI, both currently and expected in the near future – from operations and timing to helping with algorithms for trading or document drafting. However, smart funds and advisors will remember that AI is a tool and that it can’t replace the creativity and relationships that people bring to matters, which often make the difference on a fundraising or a deal.
7. Proliferation of Co-Investments: Many managers are utilizing co-investment opportunities to build relationships and improve fundraising efforts in the future. Large institutional LPs and smaller investors alike are looking to build out their co-investment capability, as opposed to primarily viewing these opportunities as a way of getting better economic deals, which had been the case in the past.
8. Hedge Funds’ Bespoke Structures: LPs are increasingly pushing for fee discounts tied to firm or fund AUM and are now seeking cash hurdle rates (or to exclude performance compensation on cash balances). However, hedge fund managers need to consider the implications for their particular strategy as there is no one-size-fits-all set of terms. As a result, managers will increasingly need to negotiate bespoke terms based on their strategies.

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