ASC Advisors May 2026 Newsletter
ASC Advisors May 2026 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.
AI Adoption in Alts
AI adoption across investment management is accelerating quickly. Most hedge funds and asset managers are already using tools like ChatGPT and Claude, primarily to more efficiently and quickly complete tasks such as summarizing documents, processing datasets, and automating internal workflows.
Firms remain reluctant to rely on AI for core investment decisions, and managers are adamant that portfolio construction and security selection remain firmly in human hands, largely due to concerns around accuracy, data security, and the risk of “hallucinations.” A key limitation is that AI performs best on publicly available, unstructured data, while the most valuable investment insights depend on internal proprietary, highly sensitive datasets that are often poorly organized. As a result, many firms face a “trust gap,” where the technology is capable, but the underlying data infrastructure is not and privacy concerns are paramount.
At this point, AI is generally seen as a force multiplier rather than a replacement. It can enhance speed, scale, and efficiency, but cannot eliminate the need for human oversight. The firms most likely to benefit are those that invest in strong data infrastructure and integrate AI thoughtfully into their processes, while maintaining a clear human decision-making layer.
Q1 M&A and IPO Recap
Global M&A activity slowed in Q1, however, companies involved were larger in size, increasing total corporate deal value by 26%. This trend of larger size and fewer deals also applied to the private markets, where M&A deal value soared to $861.1 billion in Q1, marking the strongest start since 2021, and a 9.7% increase over Q1 2025. Despite that, the 7,924 deals announced represents a 30% drop from the prior year.
Taking a look at IPO activity, there was significant appetite for large defense, likely related to geopolitical tension and conflict, and AI infrastructure public listings, continuing the focus on AI buildout. As we move into the summer, the $5 billion IPO of Pershing Square at the end of the month marked the largest IPO of 2026, as well as the largest closed end fund IPO in history. Additional mega IPOs SpaceX and OpenAI expected to drive unprecedented valuations and interest later this year.
Continuing Changes at the SEC
David Woodcock, a Partner at Gibson, Dunn & Crutcher, has taken the role of SEC Enforcement Director after Margaret Ryan’s abrupt departure.
This transition and potential impact on the SEC’s leadership and enforcement philosophy, could have ripple effects for markets and investment managers.
Under the new administration, enforcement activity has slowed by a large margin, with total actions declining roughly 22% year-over-year and financial penalties also falling behind previous years. Whether Woodcock shifts that direction is to be seen, with initial expectations of a targeted approach on enforcement, with increased emphasis on complex cases in areas like private funds. Structural changes, such as requiring commissioner approval to launch investigations and a reduction in enforcement staff support those expectations of a more controlled and selective posture on enforcement.
For investment managers, this approach suggests a continued environment of lower headline enforcement risk, but a potential increase in scrutiny on high-impact, technically complex areas as the agency regains footing under new leadership.
Private Credit Scrutiny Continues
Private credit markets remain under heightened scrutiny as regulatory attention and bank risk assessments continue to evolve. According to Reuters, regulators have begun assessing bank exposure to private credit, highlighting concerns around leverage, liquidity, and the growing overlap with traditional lending channels.
Banks are starting to tread more carefully, especially where fund finance, direct lending, and private equity overlap. While credit conditions remain stable, the shift in tone makes it clear they are paying closer attention to downside risk in a sustained higher-rate environment.
Despite pressures and individual sell-offs, the broader market does not appear to be unraveling. Instead, the shift reads more like a transition into a more mature phase, where disciplined underwriting, stronger structures, and transparency are becoming more important as private credit takes on a larger role in the financial system.
ASC Advisors has robust experience helping firms communicate, especially when differentiation from peers and strategy becomes more essential, and we’re seeing that need more and more as this space continues to mature.
The Geopolitical Impact on Markets
Geopolitical conflict in the Middle East continues to play a major role in market stability, and while numbers have been positive lately as narratives have shifted towards a potential end of tensions in the region, it is yet to be seen how and when things will settle and stabilize, with Iran launching new attacks in recent days.
While things remain uncertain and oil, gas and energy prices continue to fluctuate accordingly, the markets are proving resilient to-date, and the path forward will remain top of mind for both reporters and investors.
Firm News
Every year, Steve ventures down to GAIM Ops Cayman to host panel discussions and to catch up with both friends and clients.
Steve first hosted a panel with renowned financial journalists Bethany McLean and Erin Arvedlund. The pair discussed breaking some of the most consequential financial stories of our time.
Steve’s second panel was with Robert Johnston, Partner at Lowenstein Sandler LLP, and they discussed crisis communications and measures investment managers should take to prepare in advance of a crisis.
We look forward to next year and attending GAIM Ops West in October.
