Equity Funding Blog

Where are Hedge Funds Investing Their Capital in the Trump Era?

The day before President Trump was sworn into the Oval Office, I highlighted the potential impacts his presidency may have on small and medium businesses (SMBs).

  • Investors will turn to the private market
  • Deregulation will fuel community bank recovery
  • Investment will flow to private companies in the American heartland
  • Traditional sources of funding for SMBs will not keep up with demand

We have seen deregulation and investment in the private market undermine early guesses of what the ‘new normal‘ is. Instead, active investors who correctly interpret the impact of the Trump administration’s tax cuts and deregulation are seeing outsized returns in private companies. While this is no easy task, it’s proving to be ever more difficult to get significant returns in public markets.

Investors such as Dan Loeb, the billionaire hedge fund manager of Third Point, have taken wind and are making massive investments in companies that reduce search and transactional costs of investing in private companies. Because traditional sources of funding for SMBs are unable to keep pace with demand, FinTech companies that facilitate access to capital are seeing an uptick of great investment opportunities arrive at their doorstep. Naturally, smart money will flow to these opportunities.

Last week Forbes reported that Dan Loeb is invested heavily into the marketplace lending space. This shift in strategy comes just a few months after Loeb reduced his U.S. public market exposure. Loeb noted that “the origination and securitization of assets have become more difficult for larger financial institutions, smaller technology-driven platforms have filled the void.” It seems that regardless of how the economy reacts to the Trump administration’s policy changes, many FinTech companies and private investors look poised to benefit. The rest of the winners and losers of the Trump presidency will become more clear in the coming months.


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