The 2022 Global Private Equity Report: Market Overview 00:00 08:58 Today on Dry Powder, we'll cover the essential indicators of 2021, which can inform your strategy in 2022 and beyond. 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. Fundraising hit a new record in 2021 with established fund managers riding the wave. More than half of respondents (58%) highlighted it as the top risk factor to their portfolio. Performance also declined from 2021s high as lower marks offset current yield gains. Screening results include only M&A Exits not IPOs. Eine umfassende Bewertung wichtiger Trends, die das globale Anlagerisikoumfeld und unsere Portfolioallokationen beeinflussen. In Indonesia, for example, stakeholders including entrepreneurs, venture capital (VC) funds and politicians, are working in concert to pre-empt potential fintech-related regulatory issues observed in the U.S. and China, such as crackdowns in the peer-to-peer lending space. Private equity surged ahead with soaring deal and exit values. 48% of respondents were senior level professionals. Investors flocked to the asset class because of its ability to provide stable cashflows, less correlated returns, and a hedge against inflation. This has played out among Korean tech companies where early-stage investments are limited to local VCs, keeping valuations modest. The research defines outperformers as companies whose score on a series of assessed ESG metrics improved over time. Markets climbed higher still, awash with central-bank-induced liquidity. Deal volume fell 20 percent, declining in each consecutive quarter throughout the year (Exhibit 5). 1981121. . OVERVIEW OF THE INDUSTRY Executive Summary Despite the economic slowdown triggered by the pandemic, global private equity & venture capital AUM has increased by 6.1% from the end of 2019, to $4.74tn as of June 2020. Review sample excerpts of data and insights from our 2022 Global Alternatives Reports when you download the free Alternatives in 2022 report today.. Venture capital assets under management tripled between December 2016 and March 2021, from $574bn to $1.68tn. Closed-end fundraising declined 23 percent year over year. For example, recent McKinsey research found that publicly traded ESG outperformers that also outperformed peers on margin and growth delivered 200 basis points in excess return to their shareholders over companies that only outperformed financially.6McKinsey research to be published. VC fundraising also saw an increased level of activity, with an aggregate capital raised up 23% on the previous year. Subscribe to Bain Insights, our monthly look at the critical issues facing global businesses. 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. research Infrastructure and natural resources grow and evolve, Private markets advance their ESG agendas. In the EU, MSIM and Eaton Vance materials are issued by MSIM Fund Management (Ireland) Limited (FMIL). Weitere Einzelheiten knnen aus unseren Nutzungsbedingungen entnommen werden. Welcome to Preqin's first ever Global Alternatives Report dedicated solely to Venture Capital. Source: AVCJ Research, as of 31 December 2022. Still, private markets outperformed public markets on the way down, whether due to truly more resilient portfolios, a lag in timing, or manager discretion over their marks (private markets tend to mark up less quickly during ascending markets and mark down less quickly in falling markets). Although PE firms have been slow to join the digital technology revolution, many are catching up and implementing advanced data and analytics tools to identify new growth opportunities and remain competitive. The diversity of strategies within private debt also helps explain its consistent growth. In the private markets, first-half deal activity softened but subtly so, nearly matching the record-setting pace set in 2021. NR outperformed all others, returning 15.6 percent in a second consecutive year of strong performance driven by rising commodity prices. While the industry continues to digitize rapidly, companies leading that effort found fundraising more difficult than in years past. 4 Source: BCG, Decoding the Chinese Internet Sept 2017 For more from Dry Powder on the report, you can listen to Three Essential Trends. document.write(new Date().getFullYear()); MorganStanley.Alle Rechte vorbehalten. Fundraising results differed notably across geographies, more so than in previous years. [9] PE Pulse: Five takeaways from 4Q 2021. Dry powder inventorythe amount of capital available to GPs expressed as a multiple of annual deploymentspiked. 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. These disruptions had substantial and varied impacts on private markets fundraising, performance, and AUM growth, with steep declines in certain regions and strategies, and pockets of resilience in others. PE returns disappointed, recording the worst year (through September 30) since 2008, and PE ended a five-year run as the top-performing asset class. Trial by fire: Indian PE ecosystem resilient in a globally challenging year. Its our market overview from Bain & Companys 2022 Global Private Equity Report. Indeed, LatAm grew by an outstanding 225%, to $19.5 billion in 2021 from almost $6 billion in 2020, with the top 12 deals accounting for a third of the total deal value in the region. Private equity's global dry powder, or uninvested capital, stood at a record $1.3 trillion as of September 2021, according to Preqin. S&P Global Market Intelligence. Notably, 40% of respondents from North America and 26% from Europe claim that they dont face any major challenges, while only 11% of LatAm investors and 13% of Middle East investors feel the same. Labor shortages in the wake of the pandemic are undoubtedly playing a role in the overall picture. [4]The most favored industry group within the sector across regions, according to our respondents, is by far Software & Services (61%), while only 17% plan to invest in Hardware. Since these charges and expenses are different depending on a contract and other factors, MSIMJ cannot present the rates, upper limits, etc. In a break from years past, PE performed worse than other private asset classes, producing negative returns (through September 30, 2022) for the first time since 2008. Exit activity bounces back and set for another active year. 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. This article is a summary of a larger report, available as a PDF, that is a collaborative effort by Pontus Averstad, Alejandro Beltrn, Marcel Brinkman, Paul Maia, Gary Pinshaw, David Quigley, Aditya Sanghvi, John Spivey, and Brian Vickery, representing views from McKinseys Private Equity & Principal Investors Practice. Source: S&P Global Market Intelligence. (As of 7/10/2021). All forecasts are speculative, subject to change at any time and may not come to pass due to economic and market conditions. Get the long story short in the latest episode of our Dry Powder podcast. Private market valuation refers to round size, as determined by capital invested divided by no of deals. 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. In Switzerland, MSIM materials are issued by Morgan Stanley & Co. International plc, London (Zurich Branch) Authorised and regulated by the Eidgenssische Finanzmarktaufsicht (FINMA). Private equity funds continued to deliver returns outpacing any other asset class. No representation or warranty is made as to future performance or such forward-looking statements. Second, LPs are increasingly incorporating ESG metrics into their capital allocation processes. 6 Source: PPRO Asia Pacific, Western and Central Europe, North America Payments and e-commerce report 2022. 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). ASIAN BUSINESSES RIPE FOR PROFESSIONALIZATION The Covid-19 pandemic re-emphasized the importance of localized operations, as closed borders made it impossible for non-local managers to undertake transactions. Morgan Stanley Investment Managements 1GT Co-Leads $50 Million Funding for Everstream Analytics. Going into 2022, PE investors remain largely bullish on the investment activity outlook. Alternative investment funds are often unregulated, are not subject to the same regulatory requirements as mutual funds, and are not required to provide periodic pricing or valuation information to investors. However, GPs who are willing and able to do the hard work have an additional lever to create value in companies and can potentially deliver alpha above their peers. [1] The survey was conducted over the period of 15 weeks between October 4, 2021, and January 16, 2022. Japan: For professional investors, this document is circulated or distributed for informational purposes only. A surge in deal-making drove global private equity deal value to a total of $603 billion as of October 2021, or $804 billion on an annualized basis, which Preqin notes would surpass a record the industry set in 2007. Real estate (23 percent) and private equity (15 percent) declined most precipitously from 2021s record highs, while private credit (+2 percent) proved more resilient. It's our market overview from Bain & Company's 2022 Global Private Equity Report. Calvert Research and Management, ARBN 635 157 434 is regulated by the U.S. Securities and Exchange Commission under U.S. laws which differ from Australian laws. 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. 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. 37% think it will remain the same, a slight increase over 2021 when only 27% of investors expected deal activity to remain flat. 43% were Private Equity Firms, 29% were Venture Capital firms and 28% were firms doing both Private Equity and Venture Capital investments. France: MSIM FMIL (Paris Branch), 61 rue de Monceau 75008 Paris, France. Please read and agree to the Privacy Policy. 2 Preqin, data as of September 2022. Spain: MSIM FMIL (Madrid Branch), Calle Serrano 55, 28006, Madrid, Spain. 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. Vintage years beyond 2017 have been excluded as performance is less mature and may be too early to tell. Persons considering an alternative investment should refer to the specific investments offering documentation, which will fully describe the specific risks and considerations associated with such investment. From a GPs perspective, effecting operational change requires more effort and a specialized skill set, as well as significant influence on a company which is often lacking in minority stake deals (the predominant deal type in much of Asia). Alle Morgan Stanley Investment Funds anzeigen, View All 1GT: Climate Investing Reinvented. Global Private Equity Report McKinseys Private Markets Annual Review: 2017 to 2022. Economic environment at the forefront of risk concerns. 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. 11 Bain & Company, "Asia-Pacific Private Equity Report 2022". To date, top-line revenue growth has been the largest contributor to Asian PE returns.11 This is unsurprising, given that until recently growth has been easy to come by in Asian markets, making efficiency (and hence margin) improvement less of a focus. Following the record highs achieved in 2021, which were buoyed by pent-up demand from the earlier stages of the pandemic, several exogenous macroeconomic events stymied growth. Together, we achieve extraordinary outcomes. Private markets have enjoyed strong tailwinds since the depths of the Global Financial Crisis (GFC). S&P Global Market Intelligence Retrieved from: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/private-equity-managers-expect-another-boom-year-in-2022-68394243, [3] Preqin Pro, (as of 07/02/2022). 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. [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. Exits in the region are notoriously complicated, as tighter public markets limit IPO options and geopolitical uncertainty clouds valuations. Many attributes of businesses located in Asia are well-suited to operational improvements that can both further growth and increase margins. Global private markets fundraising declined by 11 percent to $1.2 trillion. (As of 13/01/2022). As in 2020, when private debt was the only private asset class that recorded fundraising growth, investors ability to allocate to one or another strategy based on the prevailing market environment has contributed to consistent top-line growth through business cycles (Exhibit 7). 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. of the securities, and MSIMJ accepts such commission. The 2022 Preqin Global Alternatives Reports are the most complete and in-depth annual reviews of private equity, venture capital, private . 314182, which accept responsibility for its contents. S&P Global. In unserem monatlichen Global Equity Observer finden Sie unsere Gedanken zu weltweiten Ereignissen aus Sicht unseres qualitativ hochwertigen Anlageprozesses. Natural resources strategies, meanwhile, generated relatively strong performance for a second consecutive year, buoyed by elevated commodity prices. 13 Russell Reynolds, Transitioning to the Next Generation: Leadership succession within family businesses in Southeast Asia, November 2021. In particular, megafunds gained prominence: 11 funds of more than $10 billion each were raised, totaling $170 billion collectively (Exhibit 4). Investing in Asian private equity comes with a unique set of challenges and risks beyond what this paper has explored. Under-penetration of financial services and modern retail presented an opportunity for China to develop more advanced solutions than what existed in the West. Beneath these headline statistics, revolutions in energy, mobility, and digitization are changing the face of infrastructure investing. Please select an industry from the dropdown list. Conversely, dollars raised by sub$5 billion funds decreased by 28 percent. NOT FDIC INSURED | OFFER NO BANK GUARANTEE | MAY LOSE VALUE | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY | NOT A DEPOSIT. 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. Beyond localized operations, the ability to adapt to unique customs can be both a hurdle and opportunity. The discrepancy this year drove private market allocations higher on a percentage basis across institutional portfolioscloser to preexisting targets for most, and above targets for many limited partners (LPs)triggering the so-called denominator effect. This trajectory led to faster adoption; based on data from 1997-2015, unicorn status Chinese Internet startups took an average of four years to reach their $1 billion valuationversus seven years for their U.S. counterparts. Ethnic, racial, and gender representation also remains imbalanced in senior positions and investing roles, suggesting that firms broadly continue to miss talent opportunities. The largest five managers accounted for 29 percent of all fundraising, the highest share of the last decade, and tenants favored class A real estate as they fought to attract and retain employees. On average, 56% of respondents believe deal activity will improve in the next 12 months. As measured by year-to-date IRR as of September 30, 2022, for global funds vintages between 2000 and 2019. For some strategies, a contingency fee may be incurred in addition to the fee mentioned above. The Market Monitor series includes a wide array of market charts and views to guide your investing discussions. 7 An efficient market is one where the market price is an unbiased estimate of the true value of an investment. Across the entire investment life cycle, from fundraising and asset selection to value creation and exit planning, ESG is on the minds of investors (Exhibit 11). Tighter financial conditions and general risk aversion continued to slow activity across the venture capital industry in the fourth quarter of 2022. Italy: MSIM FMIL (Milan Branch), (Sede Secondaria di Milano) Palazzo Serbelloni Corso Venezia, 16 20121 Milano, Italy. Note that the data discussed here is limited to only what is reported to Preqin; as a result, the dataset may suffer from survivorship bias. Anne Philpott, Churchill Asset Management 3 Preqin, data as of July 2022. Since 2017, fundraising in Asia has declined 16 percent per year, driven primarily by reduced investment in China. Beyond China (which is currently facing its own challenges), leapfrog potential exists in other parts of Asia. Australia: This material is disseminated in Australia by Morgan Stanley Investment Management (Australia) Pty Limited ACN: 122040037, AFSL No. Additionally, the deal-making momentum of 2021 continued through the first half of the year before falling dramatically in the second, weighed down by reduced credit availability and valuation uncertainty. 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. IT and Healthcare sectors will continue to be in high demand, with ESG considerations taking an increasingly central role in the investment decision process and beyond. Federal and state tax laws are complex and constantly changing. More than three-quarters of firms (77%) say they are planning to exit their portfolio companies, marking an increase from last year (66%). Key Takeaways Beyond robust GDP growth, under-penetration in many sectors creates opportunity for accelerated growth. North America registered a 111% increase in aggregate deal value on the previous year and accounted for half of the total transaction value ($534 billion). MSIM, the asset management division of Morgan Stanley (NYSE: MS), and its affiliates have arrangements in place to market each others products and services. Stay on top of today's volatile markets with these timely resources. Critical in this endeavor is the identification of private equity managers which possess the appropriate skills and requisite experience to manage the regions unique challenges. For illustrative purposes only.[8]. [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). Each year since its inception, this annual publication has discussed new records in fundraising and deal flow while celebrating strong performance across asset classes. 2021 PREQIN GLOBAL PRIVATE EQUITY & VENTURE CAPITAL REPORT - SAMPLE PAGES 1. The proportion of total private capital fundraising that came from managers with an investment policy that includes ESG issues rose to 66 percent in 2022,5Preqin. EY. [7] S&P Capital IQ Pro Platform (as of 27/01/2022). In total we received 357 responses from PE and VC investors globally. The continued momentum in 2022 was understandable, as debts current yield and senior position in the capital stack have long made it a haven in volatile periods. Registered No. Tech-focused buyout funds performed worse than other buyout funds for the second consecutive year, and venture capital (VC) underperformed buyout strategies for the first time since 2017. Interest rates stayed low, credit availability was high, and valuations rose consistently. Each MSIM affiliate is regulated as appropriate in the jurisdiction it operates. The 2022 Preqin Global Private Equity Report offers the industry's most complete and in-depth annual review. Going forward, shifting macroeconomic conditions will make efficiency initiatives an increasingly important value driver in Asian private equity. [9]Many PE investors now consider ESG factors when building and managing their portfolio. Insights Blog: Five Findings from COP27 with Vikram Raju. The pattern in 2021 and 2022 was no different: despite rising US Treasury (UST) rates, cap rates decreased and values rose. Andrew Slimmon, Lead Portfolio Manager der Fonds und Strategien des Applied Equity Advisors Teams, teilt seine Einschtzung der Finanzmrkte. By Cameron Joyce, CFA and Michael Patterson. 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. Information regarding expected market returns and market outlooks is based on the research, analysis, and opinions of the investment team of the Private Markets Solutions Team. New government policies that provide incentives for certain ESG investmentsmost notably the US Inflation Reduction Act of 2022are likely to strengthen this correlation further. Real estate deal volume declined 20 percent to $1.1 trillion, also the second-highest year on record. Report is also available in Chinese, Japanese and Korean upon download. We asked the CEO of Moonfare what it takes to get ordinary investors up to speed and investing in private equity with confidence. This can lead to less friction as industries grow. [14], Private Equity firms gradually catching the digitalization train. Source: S&P Global Market Intelligence. The definition of infrastructure and natural resources continues to expand, with todays funds now taking more equity risk than yesteryears did. However, the overall number of firms not considering ESG factors when looking for new investments remained unchanged from last year at approximately 20%. Because of the deterioration in technology valuations, VC and growth equity returns led the fall, in stark contrast to the last several years. The contents of this material have not been reviewed nor approved by any regulatory authority including the Securities and Futures Commission in Hong Kong. Registered Office: 25 Cabot Square, Canary Wharf, London E14 4QA. SCARCITY VALUE DRIVES SIGNIFICANT EXIT PREMIUMS Private markets fundraising fell 11 percent to $1.2 trillion, as the denominator effect affected some LPs ability to allocate capital. According to our latest Global Private Markets Review, private markets faced a year of two halves in 2022, with buoyancy in the first half and plummeting deal volumes, declining performance, and falling valuations in the second. The investment strategies described in the preceding pages may not be suitable for the recipients specific circumstances; accordingly, you should consult your own tax, legal or other advisors, both at the outset of any transaction and on an ongoing basis, to determine such suitability. Outside the US and EU, Eaton Vance materials are issued by Eaton Vance Management (International) Limited ("EVMI") 125 Old Broad Street, London, EC2N 1AR, UK, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority. The complexity and idiosyncrasies of Asian markets usually result in greater opacity to valuations. '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. McKinsey research to be published. A strengthening dollar accounted for a material portion of the dollar-based decline in fundraising in non-US markets. Even in 2020, when activity stalled briefly during the early months of the COVID-19 pandemic, private markets hummed again in the second half. Institutional investors sought out the asset class for various features that are attractive in times of market volatility: current yield, floating rates, and relative insulation (via its senior position in the capital stack) from declining valuations. While emerging Asian countries generally lag in terms of adoption of traditional banking products (e.g., credit cards),5 consumers in emerging Asia over-index on adoption of fintech products.6 Knowledge gains from more established regions can serve as the foundation for even better solutions in more emerging Asian regions. At $2.5 Bn, MSIM Raises One of the Largest Funds Focused on Single Asset GP-Led Continuation Vehicles. 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. Exit volume fell sharply, as sponsors chose to hold assets rather than sell into a declining-valuation environment. Asian Private Equity: Wheres the Risk Premium? A pre-investment ESG diligence includes a materiality scan, ESG performance and benchmark, value-at-stake analytics, and an ESG maturity assessment. Further, there is a local-global arbitrage opportunityidentifying a company at a well-priced local market entry valuation, repositioning the company for global markets, and exiting at a premium valuation commensurate with a global company.
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