ASC Advisors April 2025 Newsletter
ASC Advisors April Newsletter
Welcome to ASC Advisors’ monthly newsletter, where we provide thoughts around recent developments affecting the alternative investment management industry, as well as provide updates on our firm and team.
Market Volatility
With the ongoing implementation of tariff and new spending policies, market volatility has increased significantly, resulting in a drawdown of approximately -6.35% in the S&P and -8.15% in the Nasdaq in March. In response to surging market volatility, hedge fund managers moved aggressively to cut back risk given the uncertainty.
The expectation remains that volatility will persist, given tariff policies and as economic, domestic and foreign policy continue to restructure global trade. With the magnificent 7 and other tech stocks being impacted especially hard, there has been speculation and commentary around a shift to value and macro / volatility strategies, which may benefit from the increased volatility and trading environment.
SMAs
Separately Managed Accounts (SMAs) are experiencing a significant growth trajectory; current projections indicate that assets could surpass $5 trillion by 2026. In fact, managed accounts, including SMAs, saw net inflows of $14.3 billion in the second half of 2024, contributing to a 50% increase in SMA usage by advisors over the past five years.
The growth of SMAs is fueled by a focus on personalized solutions and tax management advantages, which have attracted interest from advisors and made them a prominent choice for those seeking efficient and customized investment options for affluent clients, evidenced by 31% of advisors intending to increase their SMA investments in 2025.
More broadly, SMAs and managed investment schemes (MIS) grew by 35.9% in 2024, increasing by $39.2 billion to reach $147.99 billion by the end of December 2024. SMAs are now among the top three structures expected to grow in popularity in the near-term, alongside active and passive exchange-traded funds (ETFs).
The largest SMA managers are also expanding their market share, with the top 10 managers controlling 65% of the market in Q3 2024, up from 52% three years earlier. For instance, Goldman Sachs Asset Management, the largest SMA manager, oversaw more than $400 billion in SMA assets by Q3 2024. The sector's funds under management (FUM) have grown 160% from 2019 to 2024, driven by the operational and investment efficiency of model portfolios.
ESG Uncertainty
ESG's role in the corporate and financial world has shifted drastically over the months leading up to and through this year's inauguration. For hedge funds and other investment managers, integrating ESG into the GP-level management and developing and instituting some level of ESG policy had become standard practice in response to years of increased focus on environmental, social and governance factors around investments and firm operations.
While the pendulum of how LPs and institutions viewed ESG had started swinging back in '24, the change has been significantly more notable during the first quarter of '25, with administration orders to eliminate DEI policies and practices driving national and global companies and investment managers to abandon any public messaging around such policies. The rapid shift away from ESG issues has left management teams, boards and investment managers in a time of uncertainty around whether to stick with existing policies or walk back part or all of what they have publicly promoted in the past. Even Blackrock and companies in Europe, champions of ESG for the past several years, have removed much of their guidance around those factors in public messaging.
We expect this pendulum to continue to swing, and in the meantime, expect media to continue to follow closely how the investment management space, including LPs and private and public company boards / management teams, reacts and addresses these policies.
