Big predictions for the year ahead on Wall Street

Hello readers,

Happy New Year!

In case you missed it, check out our rundown of the Wall Street stories that defined 2020. There’s plenty to catch up on, but here are just a few of my personal favorites:

How Dan Sundheim became the LeBron James of investing and launched one of the hottest hedge funds on earth
40 insiders reveal the meteoric rise of Silver Lake’s Egon Durban, the tech-focused PE firm’s No. 1 dealmaker
Meet Ram Sundaram, the leader of a secretive Goldman Sachs desk that’s minting billions by designing some of the bank’s most imaginative – and controversial – trades

And now that we’re officially on Day 2 of 2021, it’s a great time to take stock of what to expect in the year ahead for everything from M&A activity and the future of the IPO roadshow to financial-advisor moves and the next hot fintech trends. You can read some of our biggest predictions below.

If there’s one takeaway, it’s that there will be plenty of news, deals, and drama to keep tabs on. If you’re not yet a newsletter subscriber, you can sign up here to get your daily dose of the stories dominating banking and business.

We also have a must-see live event coming up on Jan. 5 – Sign up here for our webinar on how to make the most out of PPP.

M&A trends to watch, from a SPAC buying frenzy to a jump in cross-border deals.

Samantha Lee/Business Insider

From Reed Alexander:

M&A activity came surging back in the latter half of 2020. Now, Wall Street is primed for robust dealmaking in 2021.

A new regime in Washington could alleviate the apprehensions of some overseas buyers and spark renewed cross-border dealmaking activity, said Vito Sperduto, co-head of global M&A at RBC Capital Markets.

Cross-border transactions are likely to see a “significant uptick” once the administration of President-elect Joe Biden steps in, Sperduto said. While some international deals have happened in the past four years, “there already was a slowdown in cross-border transactions pre-pandemic,” he said, “and it’s just gotten worse.”

Read our full list of 12 M&A predictions here.

Hedge funds to watch: Big names, new launches, and under-the-radar managers

Daniel Sundheim — Brendan McDermid/Reuters

From Bradley Saacks:

Hedge funds, on average, had a good year – the most recent Preqin data shows hedge funds are up more than 13% for the year after a strong November.

But performance wasn’t equal across all strategy types, with concentrated equity managers – especially those with big private-market bets– leading the way while well-known quants struggled. And a lot of those trends are expected to carry over through the new year.

Here are the 12 hedge funds to have on your radar in 2021.

Embedded finance, finfluencers, and a ‘great rebundling’

Charli Damelio and Dixie Damelio speak during Graduate Together — Getty Images

From Shannen Balogh:

Insider asked four fintech investors what they’re looking out for in 2021. All mentioned embedded finance as a major trend that’s likely to continue as fintechs, and those in other industries, look to expand the types of services they offer customers.

“I think we’re in a great rebundling,” Ashley Paston, an investor at Bain Capital Ventures, told Insider. “If you look in any fintech, they have expanded outside of their initial product to create more value for their end customer.”

Investors also see a rise of ‘finfluencers’ to help reach younger customers, especially after Step, a digital bank for teens, launched in partnership with TikTok star Charli D’Amelio. Since its rollout in October, the fintech has over 500,000 sign-ups and raised a $50 million Series B.

Read our full rundown of the next hot fintech trends here.

What’s next for consumer banking

FILE PHOTO: A woman passes by a Chase bank in Times Square in New York City, U.S., March 7, 2019. REUTERS/Brendan McDermid — Reuters

From Carter Johnson:

The past 12 months accelerated trends like mobile banking and digitization that have long been building in consumer banking. Both were part of a broader shift away from in-person branch visits as customers shunned human contact during the pandemic.

It’s no surprise, then, that as 2020 turns into 2021, predictions for what banks will prioritize revolve around further developing technological capabilities and online customer experience.

Digitization and cloud technology, as well as the broader consumer credit environment and cost-cutting measures, were top of mind when bank execs discussed their goals for the year ahead.

Here’s what’s in store for 5 big banks in 2021, from leadership changes to ambitious tech pushes

Fintech investors are excited for another big year after 2020 blew away their expectations

Jay Ganatra, director of PayPal Ventures

PayPal

From Shannen Balogh:

Many fintechs saw massive growth and adoption in 2020. There’s also been no shortage of funding. Private funding has surged with a record number of mega-rounds – $100 million and above – this year, according to a recent CBInsights report. And fintechs like Affirm and Marqeta are gearing up for IPOs.

Investors don’t see things cooling down any time soon.

“We’re very excited for some of our more mature companies for the exit environment that they’ll be seeing,” said Jay Ganatra, partner at PayPal Ventures, whose portfolio companies include personal finance app Acorns and earned wage access startup Even.

Here’s why fintech investors are so optimistic about opportunities in 2021, from M&A and public listings to competitive private funding rounds

Tech will continue transforming the legal industry at lightning speed

legal tech lady justice code 2x1 — Samantha Lee/Business Insider

From Yoonji Han:

2020 was a big year for legal tech. As law firms and businesses across industries shifted to remote work, legal tech companies stepped in to offer digital solutions to help streamline the transition, from client relationship management to contract analysis.

Shrinking budgets and increasing client demands for efficiency further spurred lawyers’ adoption of technology.

“It’s an exciting time for the legal profession,” said Jack Rives, executive director of the American Bar Association. “Attorneys are embracing and growing more comfortable with technology.”

Insider spoke with six legal tech experts on the biggest transformations of 2020, and their predictions for the year ahead.

Here are the 5 big trends to watch

Top headhunters expect another busy year for financial-advisor moves

rise in financial advisor hiring 2x1 — Samantha Lee/Business Insider

From Rebecca Ungarino:

Not since the last financial crisis has Jeff Feldman, a Chicago-based recruiter and consultant for financial advisors, seen such a frenetic year of activity.

This year has been his second-busiest on record by volume, bested only by 2009. And he doesn’t see that slowing down. Today, Feldman’s roster of clients includes wealth managers First Republic, LPL Financial, RBC Capital Management, and Rockefeller Capital Management.

“I think you’re going to see a lot of movement in the first half” of next year, Feldman said. “Because of the past six months, advisors have taken this time to educate themselves on new business models – and the competition.”

You can read more about what’s stoking the frenzy here.

Goldman Sachs tech bankers predict the IPO roadshow will never be the same

digital wall street virtual remote work 3 2x1 — Samantha Lee/Business Insider

From Reed Alexander:

One big change from 2020 that’s likely here to stay is the efficiency that has been introduced in the IPO roadshow process, according to Jane Dunlevie, co-head of Goldman Sachs’ global internet investment banking.

Traditionally, bankers hit the road leading up to an IPO to court investors and generate buzz. But the pandemic forced bankers to find creative virtual solutions for engaging investors without meeting them face-to-face.

“It’s been highly productive,” Dunlevie said. “We’re getting roadshows done in fewer days, for the most part, so we can cut off one or two or even three days of meetings, and these IPOs are getting done I think incredibly successfully.”

Aspects of that will likely continue.

“Our expectation is to try and take the best of both worlds, if and as the world reopens,” she said. That might mean management teams hit up one or two large cities, but “we can probably take many of these efficiencies into processes going forward.”