Source: AVCJ Research, as of 31 December 2022. In the context of elevated investment levels, this likely suggests that investors are growing wary of risks such as inflation, rising interest rates and high valuations that could put the brakes on this unprecedented pace of transactions.[2]. The market environment in the next few years will present further dislocation and opportunity for fundamental value creation. PDF Preqin Global - Alter Domus By Cameron Joyce, CFA and Michael Patterson. Markets climbed higher still, awash with central-bank-induced liquidity. On some diversity metrics, private markets firms compare favorably with corporate America, although ethnic diversity is not yet broad based. Catch new episodes by subscribing toDry PowderonApple Podcasts,Google Podcasts,Spotifyor wherever you may listen. Private Equity, Venture Capital & Private Debt in Focus - Preqin Download Alternatives in 2022 | Preqin Despite these challenges, 2022 is likely to be the second-best fundraising year on record (after all data is reported), demonstratingthus fardiscipline and longer-term thinking by LPs. In 2022, mezzanine strategies were most in favor, posting record fundraising totals and more than tripling 2021s haul. A United Nations-supported network of investors promoting sustainable investment. By navigating unique cultural and geopolitical situations, arbitrage opportunities, and positioning companies well for exit, sophisticated GPs can capitalize on the inefficiencies of this market dynamic to buy low, sell high., Professionalization and Efficiency Improvement An Additional Source of Alpha. (As of 7/10/2021). Because of the deterioration in technology valuations, VC and growth equity returns led the fall, in stark contrast to the last several years. Shifting Gears: Private Equity Report Midyear 2022 - Bain Source: S&P Global Market Intelligence. Accordingly, save where an exemption is available under the relevant law, this material shall not be issued, circulated, distributed, directed at, or made available to, the public in Hong Kong. PE/VC investors are optimistic about 2022, with a majority betting on the current rapid pace of investment and fundraising to continue given the huge amount of available dry powder and the strong interest in the asset class. Macroeconomic events had mixed impact across sectors: rising oil and gas prices drove a resurgence in demand for traditional energy investments, while growth in renewables fundraising continued amid the multiyear push toward decarbonization. Exit activity bounces back and set for another active year. And while infrastructure and NR fund performance declined somewhat from 2021, these funds were the top-performing private markets asset classes in 2022. As bank financing dried up in the second half of the year, private lenders stepped into the void, providing financing for more than 80 percent of PE transactions in the middle market. LPs concentrated commitments among large funds as many investors chose to re-up with known, tested names while forgoing commitments to smaller, newer managers. *I have read thePrivacy Policyand agree to its terms. Digital innovation and transformation across existing workflows are imperative for PE firms wishing to maintain a competitive edge among peers. 'Private Capital' will refer to the broader spectrum of private closed-end funds, including private equity, private debt, private real estate, infrastructure and natural resources. Retrieved from: https://www.ey.com/en_us/private-equity/pulse, [10] Key Trends that will drive the ESG agenda in 2022. McKinsey research to be published. Infrastructure and natural resources fundraising rose to an all-time high of $158 billion, benefiting from the closing of a record five funds of more than $10 billion. In terms of advanced digitization, 14% declare their organizations have advanced to the point of leveraging data science for automated deal sourcing and due diligence, while only 7% of respondents said that digital technologies have been fully implemented into their playbook. Geopolitical risks, currency risks, and exits/liquidity are important considerations for investors contemplating an allocation to Asian private equity, and adequately addressing these risks are undoubtedly key to achieving positive performance in Asian markets. However, top-performing Asian private equity funds show historical performance that often exceeds top-performing North American and European funds.2 This outperformance has generally been delivered with lower levels of underlying leverage, as company-level debt is less readily available and/or less attractively priced in Asia versus Western markets, and private equity subscription lines of credit are less commonly used by funds in Asia.3 General partners (GPs) in the region that are able to identify the right market opportunities and execute accordingly have shown that they can indeed deliver that much desired risk premium. 1 Subject to third party confidentiality obligations and internal policies and procedures established by Morgan Stanley, including information barriers and allocation policies, to manage potential and actual conflicts of interest and/or in respect of regulatory requirements. The mood changed in early summer. A defining characteristic of Asian markets is the way geopolitical and cultural factors inform how business is done. The number of IPOs in LatAm in 2021 was on par with 2020, a levelling out of the steep increases seen in 2019, with most of them taking place in Brazil. In Europe, an 11-year run of fundraising growth ended, largely due to geopolitical instability and broader macroeconomic challenges, including volatility in foreign currency exchange rates. Nutzungsbedingungen. 10 Morgan Stanley Research, Investor Presentation India Banks, November 11, 2022. The third risk factor concerning PE/VC firms this year has changed considerably from last year. For more from Dry Powder on the report, you can listen to Three Essential Trends . Insights Blog: Five Findings from COP27 with Vikram Raju. This is up from 51% in 2021, indicating that its attractiveness continues to grow year-on-year. In PE, inventory jumped from a historically low 0.9 times at the end of 2021, following a year of record deal flow that outpaced fundraising, to 1.4 times, the highest ratio since 2013. Review sample excerpts of data and insights from our 2022 Global Alternatives Reports when you download the free Alternatives in 2022 report today.. In the first half of 2022, central banks fought roaring inflation by sharply raising interest rates, and public market valuations cratered. The prevailing market uncertainty also served as a shot in the arm for private credit deployment opportunities. [11] S&P Capital IQ Pro Platform (as of 25/01/2022). Stay on top of today's volatile markets with these timely resources. in advance. The contents of this material have not been reviewed nor approved by any regulatory authority including the Securities and Futures Commission in Hong Kong. Nutzer mssen die Nutzungsbedingungen lesen und akzeptieren, da in diesen bestimmte gesetzliche und regulatorische Auflagen enthalten sind, die fr die Verbreitung von Informationen zu den Anlageprodukten von Morgan Stanley Investment Management gelten. Eine umfassende Bewertung wichtiger Trends, die das globale Anlagerisikoumfeld und unsere Portfolioallokationen beeinflussen. On aggregate those funds raised $845.5 billion capital across various strategies, with growth capital funds seeing the largest upsurge. [13]In terms of exit methods, trade sale will still be the most preferable route, attracting a third of respondents (32%) versus a quarter last year. Banks began to pull back, unwilling or unable to lend. Tighter financial conditions and general risk aversion continued to slow activity across the venture capital industry in the fourth quarter of 2022. One of real estates biggest draws for institutional investors is the long-held belief in the asset classs ability to protect real value during periods of higher inflation. Office, retail, and hospitalitythe sectors most affected by pandemic-driven changes in working, shopping, and travelingshowed signs of emerging stability. Core-plus and value-add strategies are now investing in new asset categories and infrastructure service providers as GPs seek to accommodate the return expectations of a new class of infrastructure investor. Venture capital is gearing up for a cold spell as portfolio companies' growth and fundraising are slowing. By just about any measure, private equity set a remarkable new standard in 2021. MSIM's affiliates are: Eaton Vance Management (International) Limited, Eaton Vance Advisers International Ltd, Calvert Research and Management, Eaton Vance Management, Parametric Portfolio Associates LLC, and Atlanta Capital Management LLC. McKinseys Private Markets Annual Review: 2017 to 2022. This is prepared for sophisticated investors who are capable of understanding the risks associated with the investments described herein and may not be appropriate for the recipient. Datenschutz NOT FDIC INSURED | OFFER NO BANK GUARANTEE | MAY LOSE VALUE | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY | NOT A DEPOSIT. Retrieved from: https://www.capitaliq.spglobal.com/web/client?auth=inherit#news/article?KeyProductLinkType=2&id=67618330, [13] PE-backed SPACs in 2021 soar past last year's tally. PE/VC firms considering investment in the Consumer sector plan to focus on the Consumer Retail (24%) and Consumer Producers sub-sectors (18%), while taking rather a cautious approach to Consumer Leisure (8%). Though few LPs thus far have abandoned commitment plans entirely or sold portfolios as they did 15 years ago, many have pulled back, particularly from smaller and newer funds, causing fundraising to decline. [1]The study centered mostly on General Partners (GP) expectations around deal-making, fundraising, investment strategy, threats to the growth of portfolio companies, and the approach to Environmental, Social and Governance (ESG) factors. That number is likely to have grown even higher in the second half of 2022, as deal flow dried up more abruptly than fundraising slowed. Private markets deal volume plummeted, performance declined, and valuations felldramatically in certain sectors. Geographically, 45% of respondents were from Europe, 19% were from North America, 15% were from APAC, 8% were from the Middle East & Africa and 13% were from Latin America. For example, while China tech was initially a copycat play, Chinas Internet sector has surpassed the U.S. in several areas (e.g., mobile payments, online shopping). Registered No. The decline was most evident in Europe and Asia, while fundraising in North America increased slightly (Exhibit 1). Investors looking to Asia usually ask, Can I expect a risk premium? In short, yesat least based on MSIMs analysis. Indeed, real estate performance has exceeded inflation in six of the last seven inflationary periods, in part due to cap rate compression even during a rising interest rate environment. First-time fund launches also decreased by 40 percent. Please read and agree to the Privacy Policy. No investment should be made without proper consideration of the risks and advice from your tax, accounting, legal or other advisors as you deem appropriate. Globally, private equity generated $512 billion in buyout deal value during the first half of 2022, putting it on pace to produce the second-highest annual total ever (behind 2021's all-time record). Changes in consumer behavior is no longer one of the top five factors of concern, decreasing to 17% this year from 26% in 2021%) as firms now have a better gauge of consumer reactions to the pandemic and have adjusted their strategies accordingly. The report finds that despite solid foundations, last year was slow for both fundraising and investments, while performance held up better than the global . Report is also available in Chinese, Japanese and Korean upon download. [7] S&P Capital IQ Pro Platform (as of 27/01/2022). ESG still clearly faces challenges in its implementation, such as the lack of standardized performance reporting, and will certainly require time before all companies can be on board. Out of those PE firms that have been fundraising in the last 12 months, a quarter indicated that convincing Limited Partners (LPs) about the investment strategy and source of competitive advantage is the biggest challenge faced during the process. Conversely, only 18% of North American respondents see it as a hindrance, the smallest percentage across all regions. 2017 PREQIN GLOBAL PRIVATE EQUITY & VENTURE CAPITAL REPORT - SAMPLE PAGES CONTENTS CEO's Foreword - Mark O'Hare 4 1: 2017 PREQIN GLOBAL PRIVATE EQUITY & VENTURE CAPITAL REPORT Keynote Address - Joseph Bae, KKR 6 Keynote Address - Capturing Megatrends Growth through Minority Stakes - Stanislas Cuny, Amundi 8 2: OVERVIEW OF THE PRIVATE EQUITY . In the EU, MSIM and Eaton Vance materials are issued by MSIM Fund Management (Ireland) Limited (FMIL). Example: 70% of all Europe-based investors responded that they are planning of making investments in Software & Services. The diversity of strategies within private debt also helps explain its consistent growth. a new high. Its our market overview from Bain & Companys 2022 Global Private Equity Report. [12] Robust private equity exits may set record year. The adoption of technology within China over the past two decades is a good example. Banking Essentials Newsletter: 5th May Edition, Enterprise 'shippers' seek help with supply chain digital transformation, have budget to spend, Private Markets 360 | Episode 3: Finding efficiency with technology (with Nick Fox of AEA Investors). Capital deployments into larger vehicles increased as investors re-upped with existing managers while forgoing commitments to smaller and newer managers. In total, 24,520 deals were closed, with an aggregate deal value worth $1.04 trillion, nearly double the amount from the year before. FT Adviser. It conducted a debut survey of firms in this sector, gathering professional insights and opinions on how they are likely to fare in 2022 in terms of fundraising, dry powder, regulations, ESG considerations, private equity operations, investing areas, strategies, outsourcing, valuations and exits. In addition to the copycat model, Asian markets have demonstrated a leapfrog phenomenonwhereby one region replicates and rapidly improves upon an innovation witnessed elsewhere. Federal and state tax laws are complex and constantly changing. In office, for example, net absorption turned positive as attendance rates seemingly reached a new equilibrium. The Covid-19 pandemic re-emphasized the importance of localized operations, as closed borders made it impossible for non-local managers to undertake transactions. Infrastructure and natural resources (NR) overcame broader market headwinds in 2022 to set a new fundraising record of $158 billion (Exhibit 9). Key Takeaways Sustainability-related deals (the "E") increased by 7 percent to nearly $200 billion, proving resistant to the deal-making headwinds that affected other asset classes. Across all regions, digitalization is high up on PE agendas and awareness has risen significantly. But whether the exit activity will be on par with that of 2021 remains to be seen, and may hinge on looming economic risks. LP willingness to allocate more capital to diverse deal teams is prompting more GPs (52 percent in 202122) to share DEI data during fundraising. Investors flocked to the asset class because of its ability to provide stable cashflows, less correlated returns, and a hedge against inflation. EY. Paired with lower valuations public market valuations trading as much as 40-50% lower than the US on a P/E basis,8 and private markets valuations that have almost halved from their peak9 there should be a particularly attractive opportunity at hand. The 18-month total of $1.7 trillion is by far the strongest year and a half in the industry's history (see Figure 3). 314182, which accept responsibility for its contents. Clients should always consult with a legal or tax advisor for information concerning their individual situation. The median VC and growth funds lost 6.3 and 7.3 percent, respectively, through the first three quarters of 2022, while the median buyout fund earned 0.9 percent. Beyond robust GDP growth, under-penetration in many sectors creates opportunity for accelerated growth. Indirect charges also may be incurred, such as brokerage commissions for incorporated securities. [11]Another active year is anticipated[12]as sponsors continue to take advantage of favorable exit conditions and new dynamics such as the rise of Special Purpose Acquisition Companies (SPACs). 2022 is likely to be an active year for private equity exits, and many investors are preparing to divest their portfolio companies. Companies with cutting-edge tech and design can be positioned for Asia and/or global expansion and sold at a premium valuation. Private equity surged ahead with soaring deal and exit values. As of the second quarter of 2022, dry powder exceeded $3 trillion, reflecting an 8.4 percent year-over-year increase and marking the eighth consecutive year of growth. Investor strategy is backed by robust numbers: in 2021, IT accounted for nearly half of total deals completed (46%) and a third of total deal value (37%). A Private Equity Lens on the Energy Transition The global shift away from carbon-based fuels is gaining momentum. After making an investment, GPs have five value creation levers they can pull to improve their portfolio: Pontus Averstad is a senior partner in McKinseys Stockholm office; Alejandro Beltrn is a senior partner in the Madrid office;Marcel Brinkman is a partner in the London office; Paul Maia is a partner in the New Jersey office; Gary Pinshaw is a senior partner in the Sydney office; David Quigley is a senior partner in the New York office, where Aditya Sanghvi is a senior partner; andJohn Spivey is an associate partner in the Boston office, where Brian Vickery is a partner. equity, real assets, and debt capital markets. PDF 2016 Preqin Global Private Equity & Venture Capital Report Deal volume fell 20 percent, declining in each consecutive quarter throughout the year (Exhibit 5). Sustainability-related deals (the E) increased by 7 percent to nearly $200 billion, proving resistant to the deal-making headwinds that affected other asset classes. Similarly, Australian software companies can be invested in at modest high single-digit/low double-digit EV/ EBITDAs and sold on to global strategics at premium double-digit EV/EBITDAs. Automating these manual, inefficient processes are potential easy-wins to improve efficiency. After more than doubling year over year in 2021, multifamily deal volume fell 29 percent in 2022, accounting for nearly half of the asset classs overall decline in deal activity. Add-on deals, which tend to be smaller, continued to gain share as a percentage of total deals. Going into 2022, PE investors remain largely bullish on the investment activity outlook. As overall GDP growth slows, efficiency improvement will become increasingly more important. As institutional capital gravitates toward massive generalist private market managers with well-established . The table below indicates the fund types Preqin considers as constituting each asset class. This publication, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. He leads the Private Market team in shaping the strategic direction of the program, plays an active role in sourcing, monitoring of investments and serves on various underlying partnership advisory boards.s. Eine zeitgerechte Analyse markt-verndernder Ereignisse und deren Wirkung auf das Anlageumfeld. While the long-term demand for capital is tremendous, with a projected global infrastructure spending gap of $15 trillion through 2030,2McKinsey. There was a notable drop in private debt deal volumes, driven by the slowdown in PE and only partially offset by market share gains taken from bank and syndicated financing channels (Exhibit 8). Since 2017, fundraising in Asia has declined 16 percent per year, driven primarily by reduced investment in China. Source: S&P Capital IQ as of 28 February 2023. Planning to Commit More Capital to Private Equity Investors' Expected Capital Commitments to Alternative Assets in the Next 12 Months Compared to the Previous 12 Months 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Private EquityVenture Capital Private Debt Hedge Funds More Capital Same Amount of Capital Real EstateInfrastructure Less Capital More than 40% of both European and North American investors are concerned about the availability of key skills and talent, the highest number across all regions. 1981121. 12 Weforum.org How reform has made Chinas state-owned enterprises stronger October 2020. After a frenzied 2021, private equity (PE) deal volume decreased 26 percent to $2.4 trillion, while deal count fell 15 percent to just under 60,000. Since these charges and expenses are different depending on a contract and other factors, MSIMJ cannot present the rates, upper limits, etc. Screening results include only M&A Exits not IPOs. OPERATING EFFICIENCY AN OVERLOOKED RETURN DRIVER One recent survey indicates that nearly three-quarters of LPs would consider eliminating a manager from consideration if it was unable to provide acceptable standards of ESG-related disclosures.7Global Private Equity Barometer, Coller Capital, Winter 202223. While Asian private equity can be a difficult segment to diligence and access, MSIM believes that its 20+ year history investing in private equity funds and opportunistic investments in Asia, combined with the broader resources of Morgan Stanley, can help bridge this knowledge gap. (As of 31/01/2022). How market turmoil is filtering the waters of private real estate Under an IMA, with respect to management of assets of a client, the client prescribes basic management policies in advance and commissions MSIMJ to make all investment decisions based on an analysis of the value, etc. Weitere Einzelheiten knnen aus unseren Nutzungsbedingungen entnommen werden. Fundraising results differed notably across geographies, more so than in previous years. Registered in England. Like PE deal making, first-half real estate deal making continued close to the record-setting pace of the second half of 2021, but second-half volumes declined precipitously. Amid current financial market volatility, investors are revisiting asset allocations in their portfolios, hoping to identify attractive market segments with upside potential. Natural resources strategies, meanwhile, generated relatively strong performance for a second consecutive year, buoyed by elevated commodity prices. Globally, the number of companies that are beginning to implement ESG-related practices has decreased since the previous year, indicating that many companies are already well into their ESG journey. Performance also declined from 2021s high as lower marks offset current yield gains. Finally, amid the broader slowdown in technology-oriented PE deal making, investments in property technology companies fell to the lowest total in five years. Just 2,141 funds were closed during the year, 1,600 fewer than in 2021 and the fewest of any year since 2013. Economic environment at the forefront of risk concerns. A strengthening dollar accounted for a material portion of the dollar-based decline in fundraising in non-US markets. While there is generally broad appreciation for growth potential in Asia, there is often an implicit assumption that markets are efficient with commensurate valuations, or, said differently, that higher growth potential means higher valuations.7 That is not necessarily the case in Asia. But ESGs growing impact on private markets goes beyond just dedicated funds and deals: most funds (of any strategy) now consider ESG risk factors in due diligence, and some explicitly include ESG concepts in their value creation plans. More private markets managers are incorporating considerations for ESG factors into their corporate policies, operating procedures, and investment decisions. (As of 09/09/2021). 2 Preqin, data as of September 2022. In the private markets, first-half deal activity softened but subtly so, nearly matching the record-setting pace set in 2021. For those that can identify and partner with such private equity managers, there exists a promising opportunity for outperformance in the region. esgSubNav, Discover more about S&P Globals offerings, Global Credit and Risk Symposium: Unlocking Possibilities, https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/private-equity-managers-expect-another-boom-year-in-2022-68394243, https://www.ftadviser.com/investments/2021/10/07/investing-in-the-next-generation-of-healthcare-opportunities/, https://pages.marketintelligence.spglobal.com/2021-Year-in-Review-Investment-Banking-Infographic.htm, https://www.ey.com/en_us/private-equity/pulse, https://www.spglobal.com/esg/insights/key-esg-trends-in-2022, https://www.capitaliq.spglobal.com/web/client?auth=inherit#news/article?KeyProductLinkType=2&id=67618330, https://www.capitaliq.spglobal.com/web/client?auth=inherit#news/article?id=66494139, JW Marriott Sao Paulo Av.

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