2022 preqin global private equity venture capital report

Retrieved from: https://www.ftadviser.com/investments/2021/10/07/investing-in-the-next-generation-of-healthcare-opportunities/, [6] M&A Year in Review 2021. The third risk factor concerning PE/VC firms this year has changed considerably from last year. Buyout deal value and exits set all-time records for the industry. 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. 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. ITS NOT JUST THE PRICE On the heels of a banner 2021, which set records for fundraising and deal making and produced exceptionally strong returns, PE fell back to earth in 2022. Weitere Einzelheiten knnen aus unseren Nutzungsbedingungen entnommen werden. 48% of respondents were senior level professionals. In almost every regard, 2021 was an exceptional year (as we highlightedin last years report) but it was not a trend breaker. 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). 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). Venture capital accounted for 40 percent of this total, while on a sectoral basis, power and transportation targets led the pack for the third year running. Federal and state tax laws are complex and constantly changing. NOT FDIC INSURED | OFFER NO BANK GUARANTEE | MAY LOSE VALUE | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY | NOT A DEPOSIT. By just about any measure, private equity set a remarkable new standard in 2021. ASIAN BUSINESSES RIPE FOR PROFESSIONALIZATION 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. In the EU, MSIM and Eaton Vance materials are issued by MSIM Fund Management (Ireland) Limited (FMIL). Eine monatliche Publikation mit den neuesten Einblicken des Global Multi-Asset Teams zum Wirtschafts- und Marktumfeld und zur optimalen Portfoliopositionierung. 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. Infrastructure and natural resources (NR) overcame broader market headwinds in 2022 to set a new fundraising record of $158 billion (Exhibit 9). 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. NR outperformed all others, returning 15.6 percent in a second consecutive year of strong performance driven by rising commodity prices. Die auf dieser Website beschriebenen Dienstleistungen sind unter Umstnden nicht in allen Rechtsgebieten oder fr alle Kunden verfgbar. Markets climbed higher still, awash with central-bank-induced liquidity. 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. We work with ambitious leaders who want to define the future, not hide from it. a new high. For illustrative purposes only.[8]. Deal volume fell 20 percent, declining in each consecutive quarter throughout the year (Exhibit 5). Source: S&P Global Market Intelligence. This is up from 51% in 2021, indicating that its attractiveness continues to grow year-on-year. TECH AS A LEAPFROG OPPORTUNITY Beyond China (which is currently facing its own challenges), leapfrog potential exists in other parts of Asia. North America largely led this increase, accounting for 76% of the total deal value. Add-on deals, which tend to be smaller, continued to gain share as a percentage of total deals. 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. On the surface, historical private equity (PE) performance in Asia has been shown to be on par with performance numbers generated in other regions. MSIM, the asset management division of Morgan Stanley (NYSE: MS), and its affiliates have arrangements in place to market each others products and services. In China, state-owned enterprises make up approximately 40% of GDP.12 These companies have traditionally been less nimble and commercially focused than their private counterparts, with many straightforward areas for operational improvement. Note: Credit Card Penetration as defined by percentage of people age 15+ who use credit cards Source: Statista, data as of June 2022, Source: PPRO Asia Pacific, Western and Central Europe, North America Payments and e-commerce report 2022. Japan: For professional investors, this document is circulated or distributed for informational purposes only. Download the Complimentary Report. In addition to the copycat model, Asian markets have demonstrated a leapfrog phenomenonwhereby one region replicates and rapidly improves upon an innovation witnessed elsewhere. EY. Spain: MSIM FMIL (Madrid Branch), Calle Serrano 55, 28006, Madrid, Spain. More than three-quarters of firms (77%) say they are planning to exit their portfolio companies, marking an increase from last year (66%). 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. As the industry narrative turned from beta to alpha, there was less alpha to be had in 2022. 37% think it will remain the same, a slight increase over 2021 when only 27% of investors expected deal activity to remain flat. Bain's Global Private Equity Report examines the industrys strengths, its challenges, and the evolutionary path that lies ahead. 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. 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. 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. Interest rates stayed low, credit availability was high, and valuations rose consistently. The client shall delegate to MSIMJ the authorities necessary for making investment. 18% of APAC investors say that LPs demanding diversification and fierce competition against larger firms pose other significant fundraising challenges. 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. Registered No. In total, 2,543 funds held a final close, a 14% increase on the previous years tally. Retrieved from: https://pages.marketintelligence.spglobal.com/2021-Year-in-Review-Investment-Banking-Infographic.htm. Expanding capitalization (cap) rates across sectors, which represent the multiple investors are willing to pay for net operating income (NOI), drove performance lower. As overall GDP growth slows, efficiency improvement will become increasingly more important. In India, where valuations are persistently high, GPs can structure a win-win two-stage deal that involves an initial investment at a reasonable entry valuation, work alongside the entrepreneur to improve the operations and positioning of the company, and eventually exit together at a premium valuation. It's our market overview from Bain & Company's 2022 Global Private Equity Report. Vikram Raju discusses five key findings from COP27. Going forward, shifting macroeconomic conditions will make efficiency initiatives an increasingly important value driver in Asian private equity. The flow of capital into the asset class has pushed investors to look beyond traditional core infrastructure assets (Exhibit 10). Gbenga Oladeji oversees Global Private Markets for Johnson & Johnson Benefits Investment team. A Private Equity Lens on the Energy Transition The global shift away from carbon-based fuels is gaining momentum. Source: Preqin Pro as of September 30, 2022, COPYCAT MODELS ACCELERATING GROWTH [11] S&P Capital IQ Pro Platform (as of 25/01/2022). MSIMJ exercises the delegated authorities based on investment decisions of MSIMJ, and the client shall not make individual instructions. France: MSIM FMIL (Paris Branch), 61 rue de Monceau 75008 Paris, France. AUM grew as well, reaching a new high of $1.3 trillion, 14.2 percent higher than in 2021. The article was edited by Arshiya Khullar, an editor in the Gurugram office. 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). By Cameron Joyce, CFA and Michael Patterson. Fundraising hit a new record in 2021 with established fund managers riding the wave. Stay ahead in a rapidly changing world. This can lead to less friction as industries grow. For those who are not professional investors, this document is provided in relation to Morgan Stanley Investment Management (Japan) Co., Ltd. ("MSIMJ")s business with respect to discretionary investment management agreements ("IMA") and investment advisory agreements ("IAA This is not for the purpose of a recommendation or solicitation of transactions or offers any particular financial instruments. 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. 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. Most of the current fund commitment decisions were made last year, which was impacted by the denominator effect as public markets . Conclusion Venture capital assets under management tripled between December 2016 and March 2021, from $574bn to $1.68tn. [9] PE Pulse: Five takeaways from 4Q 2021. 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). 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. Looking at the investment strategy from the sector perspective, Information Technology (IT) remains the top industry of choice, with 63% of investors planning to deploy capital in this sector. 6 Source: PPRO Asia Pacific, Western and Central Europe, North America Payments and e-commerce report 2022. 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%). 37 How are increasing LP sophistication and diversification shaping the industry and the types of services GPs need to offer? Anne Philpott, Churchill Asset Management 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. FT Adviser. 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. All forecasts are speculative, subject to change at any time and may not come to pass due to economic and market conditions. The 2022 Preqin Global Alternatives Reports are the most complete and in-depth annual reviews of private equity, venture capital, private . 2 Preqin, data as of September 2022. When it comes to the fundraising outlook, half of the respondents expect fundraising conditions to remain the same and another 36% believe it will improve; among Middle East and Africa investors the percentage is as high as 52%, which indicates a very positive outlook for 2022. The table below indicates the fund types Preqin considers as constituting each asset class. Open-end funds in the US grew NAV by 24 percent, with contributions exceeding distributions for the first time in two years. LPs concentrated commitments among large funds as many investors chose to re-up with known, tested names while forgoing commitments to smaller, newer managers. Financial services (2.5 times) and information technology (2.2 times) recorded the largest multiple declines among PE subsectors, while rising commodity prices drove multiple expansion in raw materials and resources (+2.6 times). The research defines outperformers as companies whose score on a series of assessed ESG metrics improved over time. Key Takeaways 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. . 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%). 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. 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. 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). As measured by year-to-date IRR as of September 30, 2022, for global funds vintages between 2000 and 2019. Source: S&P Capital IQ as of 28 February 2023. [7] S&P Capital IQ Pro Platform (as of 27/01/2022). Each region benefited from an investment spree, with Latin America (LatAm) and North America (NA) witnessing the highest uptick in aggregate deal value year-on-year. 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. 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 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. The pattern in 2021 and 2022 was no different: despite rising US Treasury (UST) rates, cap rates decreased and values rose. Australia: This material is disseminated in Australia by Morgan Stanley Investment Management (Australia) Pty Limited ACN: 122040037, AFSL No. 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. Global Private Equity Report 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%). The decline was most evident in Europe and Asia, while fundraising in North America increased slightly (Exhibit 1). Private markets fundraising in North America increased by a modest 2 percent year over year but declined in Asia and Europe by 39 percent and 28 percent, respectively. 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. Report is also available in Chinese, Japanese and Korean upon download. 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. Morgan Stanley does not render tax advice on tax accounting matters to clients. Amid current financial market volatility, investors are revisiting asset allocations in their portfolios, hoping to identify attractive market segments with upside potential. In particular, megafunds gained prominence: 11 funds of more than $10 billion each were raised, totaling $170 billion collectively (Exhibit 4). 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. Quantitative tightening and dislocation in asset prices raised fears of an economic slowdown. In 2017, for example, China represented 83 percent of fundraising in Asia, a share that dropped to 34 percent in 2022.

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