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Hope everyone’s getting at least a little time away this summer.
In case you missed it, Jose Martinez Sanguinetti, CEO of Sothys Capital, joined our Advisory Board last month. He brings a global allocator’s lens and a deep interest in how machine learning is being used to change investing.
Even better, Jose joined the board and got right to work. We published this piece where he shares what we hope will be the first of many insights on alternative investments and the Latin American market: A New Gateway to U.S. Private Equity for Latin America
We’re glad to have him with us, or as AI just told me: nos alegra contar con él.
Best,
Dan
Alternative Talking Points
We review the latest monthly reports and industry analyses across the private markets, boiling them down into a few easily digestible points to share with your clients. Contact us if you’d like more depth.
Hedge Funds: Strongest monthly performance since 2023 caps a dramatic Q2 reversal
➕ Equity Hedge strategies led the June rally. The HFRI Equity Hedge (Total) Index surged +3.4%—its best showing since December 2023—driven by big gains in Technology (+7.1%), Fundamental Growth (+4.7%), and Energy strategies (+3.7%).
➕ Event-Driven strategies stayed hot. The HFRI Event-Driven (Total) Index jumped +3.2% in June, capping a two-month gain of +6.0% as managers capitalized on special situations (+5.2%) and multi-strategy exposures (+4.6%).
➕ Macro strategies bounced back. After two weak months, the HFRI Macro (Total) Index advanced +1.3%, led by discretionary thematic (+2.5%) and commodity (+1.6%) positions.
➕ Dispersion narrowed but remains meaningful. Top-decile hedge funds returned +10.0% in June, while bottom-decile funds lost -2.6%. Over the past year, the performance gap remains a staggering 63.1%.
➕ New fund launches outpaced liquidations for the third straight quarter. Q1 saw 121 new hedge funds launched, the most since Q1 2024, while liquidations dropped to 73. Industry AUM hit a record $4.5 trillion.
Source: HFR – https://www.hfr.com
Private Equity: PE contends with stalled exits, fatigued LPs, and policy headwinds
➕ Global dealmaking slowed after a strong Q1. While global buyout deal value hit $386B in H1 (up 18.7% YoY), April activity fell 24% below Q1’s monthly average, as tariff uncertainty derailed many deals. Source: S&P Global
➕ Growth equity is a fundraising bright spot. It now represents 24% of US PE fundraising, with five of the ten largest funds closed in 2025 focused on growth strategies. Source: Ropes & Gray
➕ Secondaries offer a liquidity outlet—but highlight a bigger problem. The secondary market is expected to exceed $175B in 2025, driven by aging portfolios and stalled distributions. Source: William Blair
➕ Policy and regulation are shaping flows. Tariff concerns led 30% of firms to pause or revisit deals. New rules in the US and EU are tightening disclosure, especially around fees and ESG. Source: PwC
➕ Fundraising is on pace for its weakest year since 2020. H1 2025 numbers suggest a 20% YoY decline, driven by LP fatigue and a lack of distributions. Still, dry powder stands at a record $2.6T globally. Source: Private Equity International
➕ Exit activity stalled in Q2. North American PE exits fell 11% QoQ to $102B, reversing early 2025 momentum. IPO activity remains weak, with PE-backed IPOs underperforming VC-backed deals by a wide margin. Source: ION Analytics
Private Credit: Record fundraising meets rising red flags
➕ Fundraising is booming — especially in Europe. Global private credit fundraising surged 60% in Q1 2025 to $59B, led by a record $31B raised in Europe. North America, by contrast, posted its second consecutive quarterly decline. Source: Alternative Credit Investor
➕ Secondaries are now a primary outlet. Coller and Pantheon raised a combined $9B for credit secondaries in July alone. LPs are increasingly using the secondary market to manage liquidity as traditional exits remain elusive. Source: Coller Capital
➕ Jamie Dimon sounds the alarm. On JPMorgan’s July earnings call, Dimon warned that “you may have seen peak private credit,” citing opaque leverage and parallels to the pre-2008 mortgage market. Source: Yahoo Finance
➕ Regulatory scrutiny is rising. The Federal Reserve now estimates private credit makes up 9% of U.S. corporate debt. Boston Fed research warns of systemic risk tied to growing bank exposure to nonbank lenders. Source: Federal Reserve
➕ Investors continue to pile into Evergreens. 33% of LPs are now allocating to evergreen vehicles across private markets, with private credit topping the list of strategies being actively expanded. Source: Coller Capital
➕ Defaults remain manageable—for now. Proskauer pegged the Q1 default rate at 2.42%, while Fitch reported a 12-month trailing rate of 4.6% through May. Source: Fitch
Commercial Real Estate: The reset continues—bifurcation, distress, and selective optimism
➕ The refinancing wall is here. Nearly $1T in CRE debt matures in 2025, much of it at sub-5% coupons. Today’s refinance rates can hit 14%, creating a cash flow and valuation squeeze. Source: Pinnacle Lending Partners
➕ Office distress climbs to new highs. Trepp reports 11.08% CMBS delinquency for office loans in June, with special servicing hitting 16.38% — a 12-year record. Most troubled loans have <0.89x DSCR. Source: Trepp
➕ Secondary market surges as liquidity outlet. 2025 secondaries are expected to hit $175B, giving LPs and fund managers a release valve amid slow traditional exits. Source: Chilton Capital
➕ Data centers and industrial stay hot. Data center demand is growing at a 12% CAGR, with vacancy <2%. Industrial assets remain a capital magnet, with <0.5% delinquency rates. Source: Investment Grade
➕ PropTech moves from VC to bankable. In June alone, over $360M flowed into real estate tech firms—increasingly via debt instead of equity. Smart buildings with AI/IoT systems are becoming the industry standard. Source: CRETI
Artificial Intelligence: Cloud dominance fades as hybrid AI and agent governance take center stage
➕ AI is going hybrid. Regulated industries are pulling sensitive workloads back on-prem or to edge nodes, favoring control, compliance, and latency over hyperscale speed. Premio’s 1U edge server and AWS’s new AgentCore stack highlight a bifurcating deployment model. Source: Premio
➕ Agent security is now priority #1. A CISO survey found 37% rank autonomous AI agents as their top unsolved risk. Google’s Big Sleep became the first model to preemptively patch a zero-day, a turning point for AI-first cyber defense. Source: The Hacker News
➕ AI regulation is fragmenting. A U.S. federal moratorium failed in the Senate, paving the way for 50 states to write their own rules. Meanwhile, the EU finalized its voluntary Code of Practice for general-purpose AI. Source: CNN
➕ Financial AI goes vertical. Anthropic’s Claude Financial Analysis tool now integrates with PitchBook, Snowflake, and Box, while S&P Global feeds its MCP data directly into Claude to reduce hallucinations. Source: Anthropic
➕ New ChatGPT Agent. OpenAI announced a new system it says will help people handle complex tasks. Sounds a lot like Manus, which launched earlier this year. Looking forward to checking it out. Source: OpenAI
Worth your time
Our monthly recommendation of books, articles, research, and announcements we found interesting, important, or just plain entertaining enough to share. Sometimes, we’ll have a lot—other times, not so much. The objective is to share things that might be useful or interesting for your clients, not filler.
➕ A New Gateway to U.S. Private Equity for Latin American Investors: Third Wire Insights. Jose Martinez Sanguinetti, shares his perspective on private equity investing in the U.S. for Latin American investors and the potential impact of the Morningstar PitchBook US Buyout Replication Index, and our index replication fund, USBRIF.
➕ Trying to Add AI to Your Alternative Investment Platform? What You’re Likely Discovering: Pure Math AI. Our friends at Pure Math AI provide some food for thought for all the existing alternative investment platforms to ponder (and everyone else for that matter). If you built your platform before November 2022 (when OpenAI became widely available to the public), it’s most likely built on outdated tech. AI isn’t a feature. It’s a capability set. And like any capability, it can only perform within the limits of its infrastructure.
➕ Buyers Beware: 7 Red Flags That Signal a Private Market Reckoning: CFA Institute. Mark J. Higgins, CFA, CFP® new piece in the CFA Institute’s Enterprising Investor walks through seven warning signs that today’s private market euphoria may be entering its final—and most dangerous—phase. If you advise clients considering evergreen funds or retail-accessible alts, this is essential reading. Historical perspective, current examples, and a sharp take on valuation games.
➕ Overcoming two issues that are sinking gen AI programs: McKinsey & Company. McKinsey outlines why many enterprise AI initiatives stall: fuzzy objectives and brittle operating models.
➕ One Big Beautiful Bill (“BBB”): William J. Kelly, CAIA. Bill Kelly breaks down the sweeping megabill reshaping private markets regulation. From AI rules to BDC incentives, it’s a must-read for anyone navigating the evolving policy landscape.
➕ Why Call Them Alternatives? Especially When it Comes to Asset Allocation: Plan Sponsor. Ugh. What he’s describing—and what the megafund evergreen vehicles are quietly lobbying for—effectively bypasses the Accredited Investor standard. It shifts the gatekeeping burden from individual qualifications to the “sophistication” of the plan sponsor. And let’s be honest: some plan sponsors may be under-informed, overburdened, or directly aligned with those very same megafunds. If the end result is a limited menu dominated by a single fund family’s private equity (or private credit) sleeve, it’s hard to argue that’s in the best interest of participants.
Disclosure:
This newsletter is for informational purposes only and does not constitute investment advice. All investments, including those in equity, debt, and alternative assets, carry certain risks, notably potential liquidity and transparency issues associated with many private investments. These risks should be considered in the context of an individual investor’s objectives and risk tolerance.
The views expressed are those of Third Wire as of the date of publication and are subject to change. The information has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed.
Past performance is not indicative of future results. Investors are advised to consult with qualified financial, legal, or tax advisors before making any investment decisions. Third Wire does not accept liability for any loss or damage arising from the use of this newsletter.
By subscribing to this newsletter, you agree and acknowledge that Third Wire is not liable for any decisions made based on the information provided herein.
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