2022 preqin global private equity venture capital report

LatAm investors especially seem to have accelerated the adoption of ESG principles: the number seeking investments in companies with a good ESG track record has nearly doubled from last year, to 43% from 25%, while the number of firms that are not considering ESG factors has decreased considerably, to only 7% from 19% in 2021. Source: S&P Global Market Intelligence. The authors wish to thank Sara Bernow, Brodie Boland,Sophia Braes, Jonathan Christy, Chris Gorman, Alastair Green, Sean Kane, Kayla Miele, Alexandra Nee,Robert Palter, Alex Panas, Jason Phillips, Adam Pulsipher, Jeff Rudnicki, and Rahel Schneider for their contributions. [14], Private Equity firms gradually catching the digitalization train. 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. 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. '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. 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. 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. 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. Despite this, stakeholders are expecting 2022 to be a year of action on ESG issues, not just for climate change as expected but also for rising concerns over social issues[10]. For illustrative purposes only.[8]. Increasing representation across all levels will require managers to take fresh approaches to hiring, retention, and promotion. This is of particular concern for LatAm investors: 38% of respondents from the region say that convincing LPs about the right strategy and ability to deploy capital effectively is the biggest fundraising challenge their firm is facing. Aforementioned challengesthe higher cost and lower availability of debt, rapidly declining public market valuations, and macroeconomic uncertaintystifled growth, activity, and performance in what had been the best-performing private markets asset class for many years running. France-based fund managers are leaders in ESG investingLONDON, April 27, 2023 (GLOBE NEWSWIRE) -- Preqin, the global leader in alternative assets data, tools, and insights, published its Private . The client shall delegate to MSIMJ the authorities necessary for making investment. Valuation multiples have been falling across both public and private markets, with venture capital positions arguably the most . The decline was most evident in Europe and Asia, while fundraising in North America increased slightly (Exhibit 1). Private markets fundraising fell 11 percent to $1.2 trillion, as the denominator effect affected some LPs ability to allocate capital. 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). Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements. AUM ascended higher, as it has in every year since the global financial crisis, to $7.6 trillion. In closed-end funds, AUM reached a new peak, as it has every year since 2016, and managers raised the second-highest total on record, led by commitments to opportunistic vehicles. 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. We work with ambitious leaders who want to define the future, not hide from it. TECH AS A LEAPFROG OPPORTUNITY At $2.5 Bn, MSIM Raises One of the Largest Funds Focused on Single Asset GP-Led Continuation Vehicles. Venture capital is gearing up for a cold spell as portfolio companies' growth and fundraising are slowing. Market Intelligence in advance. MSIM will look to address these risks/opportunities in future briefs. Healthcare follows IT as the second top industry, up to 47% from 43% in 2021, attracting more investors as the sectorcontinues to offer opportunities, especially in the Healthcare Technology industry. www.capitaliq.spglobal.com, [5] Investing in the next generation of healthcare opportunities. Each MSIM affiliate is regulated as appropriate in the jurisdiction it operates. Deal volume fell 20 percent, declining in each consecutive quarter throughout the year (Exhibit 5). OPAQUE ENTRY VALUATIONS Beyond robust GDP growth, under-penetration in many sectors creates opportunity for accelerated growth. Trial by fire: Indian PE ecosystem resilient in a globally challenging year. PE buyout entry multiples declined slightly in 2022, falling to 12.9 times EBITDA from a record 13.2 times a year ago, while public market multiples compressed dramatically, declining to 12.0 from 14.6 times EBITDA. Considerations for diversity, equity, and inclusion (DEI) have become an important part of the fundraising, hiring, and investing landscape in private markets. The complexity and idiosyncrasies of Asian markets usually result in greater opacity to valuations. Going into 2022, PE investors remain largely bullish on the investment activity outlook. Global private markets fundraising declined by 11 percent to $1.2 trillion. However, many are cautious of the growing inflation and rate hikes that may impede the unprecedented rate of investment activity. Nutzungsbedingungen. For some strategies, a contingency fee may be incurred in addition to the fee mentioned above. Together, we achieve extraordinary outcomes. A defining characteristic of Asian markets is the way geopolitical and cultural factors inform how business is done. Investors looking to Asia usually ask, Can I expect a risk premium? In short, yesat least based on MSIMs analysis. In the EU, MSIM and Eaton Vance materials are issued by MSIM Fund Management (Ireland) Limited (FMIL). The economic effects of the pandemic continue to linger; however, as PE/VC firms have gained more experience with its impact, it has become less of a concern, dropping to second place this year (48%). All forecasts are speculative, subject to change at any time and may not come to pass due to economic and market conditions. research 2022 is likely to be an active year for private equity exits, and many investors are preparing to divest their portfolio companies. First and foremost, the evidence supporting a positive correlation between ESG and financial performance continues to mount, as long as the underlying company is healthy. Exit activity bounces back and set for another active year. An example of this are the shares of Indian banks and non-bank finance companies (NBFCs) where the highest quality banks/NBFCs trade at Price/Book multiples 3-7x that of the market median.10. Indirect charges also may be incurred, such as brokerage commissions for incorporated securities. We asked the CEO of Moonfare what it takes to get ordinary investors up to speed and investing in private equity with confidence. 10 Morgan Stanley Research, Investor Presentation India Banks, November 11, 2022. 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. In the private markets, first-half deal activity softened but subtly so, nearly matching the record-setting pace set in 2021. By contrast, Asia-Pacific (APAC) respondents maintain the most cautious view. 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. PDF Private Equity Market Update - CAIA Andrew Slimmon, Lead Portfolio Manager der Fonds und Strategien des Applied Equity Advisors Teams, teilt seine Einschtzung der Finanzmrkte. 2022 Preqin Global Private Equity Report | Preqin [5]In 2021, deal activity in Healthcare continued gaining momentum, not only in terms of deal count but also deal value, which reached $340 billion; Healthcare Technology deal counts contributed the most to the sectors dynamism.[6]. 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). 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. FMIL is regulated by the Central Bank of Ireland and is incorporated in Ireland as a private company limited by shares with company registration number 616661 and has its registered address at The Observatory, 7-11 Sir John Rogersons Quay, Dublin 2, D02 VC42, Ireland. 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. 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. Vintage years beyond 2017 have been excluded as performance is less mature and may be too early to tell. 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. 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. Almost 17% of PE professionals from that region anticipate the investment landscape will deteriorate in 2022. Anne Philpott, Churchill Asset Management 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). The 2022 Global Private Equity Report: Market Overview - Bain Open-end funds in the US grew NAV by 24 percent, with contributions exceeding distributions for the first time in two years. . [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. Natural resources strategies, meanwhile, generated relatively strong performance for a second consecutive year, buoyed by elevated commodity prices. McKinseys Private Markets Annual Review: 2017 to 2022. Automating these manual, inefficient processes are potential easy-wins to improve efficiency. Second, LPs are increasingly incorporating ESG metrics into their capital allocation processes. Exits in the region are notoriously complicated, as tighter public markets limit IPO options and geopolitical uncertainty clouds valuations. 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. FT Adviser. For more from Dry Powder on the report, you can listen to Three Essential Trends. While the long-term demand for capital is tremendous, with a projected global infrastructure spending gap of $15 trillion through 2030,2McKinsey. Download Alternatives in 2022 | Preqin Concerns about the availability of skills and talent as a threat to the growth of portfolio companies have doubled from last year, climbing to 36% from only 17% in 2021. Insights Blog: Five Findings from COP27 with Vikram Raju. For illustrative purposes only. MSIM, the asset management division of Morgan Stanley (NYSE: MS), and its affiliates have arrangements in place to market each others products and services. Alle Morgan Stanley Investment Funds anzeigen, View All 1GT: Climate Investing Reinvented. 44% of respondents indicated they are planning to focus on improving ESG related factors in their portfolio companies this year, and 32% are seeking investments with a good ESG track record, up from 29% in 2021. As overall GDP growth slows, efficiency improvement will become increasingly more important. As measured by year-to-date IRR as of September 30, 2022, for global funds vintages between 2000 and 2019. 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. Amid a pullback in commitments, an outsized share of capital flowed to the largest funds, as investors re-upped with their existing managers but reduced backing smaller and new funds. 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. In particular, megafunds gained prominence: 11 funds of more than $10 billion each were raised, totaling $170 billion collectively (Exhibit 4). Beneath these headline statistics, revolutions in energy, mobility, and digitization are changing the face of infrastructure investing. The statements above reflect the opinions and views of the Morgan Stanley Private Markets Solutions as of the date hereof and not as of any future date and will not be updated or supplemented. Beyond localized operations, the ability to adapt to unique customs can be both a hurdle and opportunity. of the securities, and MSIMJ accepts such commission. 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. And the ongoing war and humanitarian crisis in Ukraine further exacerbated risks to the global economy, including higher commodity prices and disrupted supply chains. 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. 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). In 2022, mezzanine strategies were most in favor, posting record fundraising totals and more than tripling 2021s haul. In our podcast series, Bain's Hugh MacArthur interviews leading experts on the trends and opportunities that will redefine the private equity industry. 2 Preqin, data as of September 2022. Subscribe to Bain Insights, our monthly look at the critical issues facing global businesses. Spain: MSIM FMIL (Madrid Branch), Calle Serrano 55, 28006, Madrid, Spain. Morgan Stanley Investment Management (MSIM) views private equity in Asia as a potential bright spot for investors that offers the opportunity for outperformance, particularly at the current juncture. Review sample excerpts of data and insights from our 2022 Global Alternatives Reports when you download the free Alternatives in 2022 report today.. In a year when other private classes fell back to earth somewhat, private debt set a new fundraising record, led by several megafund closes. 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. Banks began to pull back, unwilling or unable to lend. France-based fund managers are leaders in ESG investingLONDON, April 27, 2023 (GLOBE NEWSWIRE) -- Preqin, the global leader in alternative assets data, tools, and insights, published its Private Equity in France 2023: Preqin Territory Guide. In total, 24,520 deals were closed, with an aggregate deal value worth $1.04 trillion, nearly double the amount from the year before. 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. 2022 will prove to be the best year yet for ESG-focused fundraising, with $24 billion raised through the first half of the year. 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. 3 Preqin, data as of July 2022. Source: AVCJ Research, as of 31 December 2022. A Private Equity Lens on the Energy Transition The global shift away from carbon-based fuels is gaining momentum. A United Nations-supported network of investors promoting sustainable investment. Principles for Responsible Investment, annual report, 2022. These conclusions are speculative in nature, may not come to pass, and are not intended to predict the future of any specific Morgan Stanley investment. Contenders for the third sector of choice are the Consumer (35%) and Industrials (34%) sectors. 20% of all survey participants think that large LPs pouring capital into fewer funds with established LP-GP relationships is the second most common challenge, a sentiment felt most by European investors (23%). The diversity of strategies within private debt also helps explain its consistent growth. Its 2022, and were coming off an extremely busy year in private equity. [11] S&P Capital IQ Pro Platform (as of 25/01/2022). This progress is a result of many factors. On the surface, historical private equity (PE) performance in Asia has been shown to be on par with performance numbers generated in other regions. The research defines outperformers as companies whose score on a series of assessed ESG metrics improved over time. Registered Office: 25 Cabot Square, Canary Wharf, London E14 4QA. Finally, macroeconomic forces, including higher energy prices and geopolitical conflict, have strengthened long-term investor interest in alternative energy sources and overall energy independence. The market environment in the next few years will present further dislocation and opportunity for fundamental value creation. This has played out among Korean tech companies where early-stage investments are limited to local VCs, keeping valuations modest. SCARCITY VALUE DRIVES SIGNIFICANT EXIT PREMIUMS Venture capital assets under management tripled between December 2016 and March 2021, from $574bn to $1.68tn. Only 13% of respondents anticipate fundraising conditions to deteriorate. a new high. 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. The adoption of technology within China over the past two decades is a good example. Please select an industry from the dropdown list. New government policies that provide incentives for certain ESG investmentsmost notably the US Inflation Reduction Act of 2022are likely to strengthen this correlation further. Ein monatlicher Ausblick fr die globalen Anleihemrkte einschlielich tiefgehender Analysen wichtiger Sektoren. The 2022 Preqin Global Alternatives Reports are the most complete and in-depth annual reviews of private equity, venture capital, private . Just 2,141 funds were closed during the year, 1,600 fewer than in 2021 and the fewest of any year since 2013. Australia: This material is disseminated in Australia by Morgan Stanley Investment Management (Australia) Pty Limited ACN: 122040037, AFSL No. 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. 11 Bain & Company, Asia-Pacific Private Equity Report 2022. 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. Among this cohort, 46% of Chinese unicorns reached that status within two yearsversus only 9% of U.S. unicorns, suggesting this hyper-accelerated growth as the norm rather than the exception among successful Chinese startups.4. 5 Source: Statista, data as of June 2022. Credit Card Penetration defined as percentage of people 15+ who use credit cards. The pattern in 2021 and 2022 was no different: despite rising US Treasury (UST) rates, cap rates decreased and values rose. Overall, 41% of respondents say that their firms are in the early implementation stage, mainly focusing on using Customer Relationship Management (CRM) and digital platforms for reporting. Example: 70% of all Europe-based investors responded that they are planning of making investments in Software & Services. 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. After more than a decade of rapid fundraising growth, strong macroeconomic headwinds slowedbut did not stopprivate debts growth. Mobile solutions such as real-time online loans to the unbanked, leveraging digital information, cross-border transfers at lower friction/cost, etc., are all helping to boost financial inclusion in Southeast Asia. Datenschutz 314182, which accept responsibility for its contents. 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. 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. Yet, like most private market segments, real estate experienced a downturn in 2022 compared with the record year it followed. In total we received 357 responses from PE and VC investors globally. For example, in Japan, deals are often won based on trust, not price, as sellers look for buyers who will preserve their legacy post-transaction. 2021 was a record year for the PE industry as investment activity surpassed the trillion-dollar mark for the first time. IPM monthly blog - Edition April 2023 | UBS Global 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. There are also pockets where capital supply/demand dynamics remain reasonable, resulting in attractive entry valuationse.g., in Thailand, there is a paucity of PE managers facilitating investment opportunities in high quality, growing companies. 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. For real estate, 2022 was a year of relative highlights and challenges, with previously-struggling sectors finding stability, and top-performing sectors slowed by tailwinds. It's our market overview from Bain & Company's 2022 Global Private Equity Report. 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. Going into 2022, all regions are clearly at different stages of digital technology adoption. Signs of a flight to quality, or at least to better-known managers, emerged. This is up from 51% in 2021, indicating that its attractiveness continues to grow year-on-year. www.preqin.com, [4] S&P Capital IQ Pro Platform (as of 27/01/2022). Tighter financial conditions and general risk aversion continued to slow activity across the venture capital industry in the fourth quarter of 2022. For more from Dry Powder on the report, you can listen to Three Essential Trends . Today on Dry Powder, well cover the essential indicators of 2021, which can inform your strategy in 2022 and beyond. 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). [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. Direct lending fundraising declined from 2021, but only marginally, raising over $100 billion for the second consecutive year. ITS NOT JUST THE PRICE North America largely led this increase, accounting for 76% of the total deal value. 18% of APAC investors say that LPs demanding diversification and fierce competition against larger firms pose other significant fundraising challenges. As institutional capital gravitates toward massive generalist private market managers with well-established . 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. Amid current financial market volatility, investors are revisiting asset allocations in their portfolios, hoping to identify attractive market segments with upside potential. 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. *I have read thePrivacy Policyand agree to its terms. 37% think it will remain the same, a slight increase over 2021 when only 27% of investors expected deal activity to remain flat. This year we also included a question on investors advances on their digitization and automation journey.