2022 preqin global private equity venture capital report

Global Private Equity Report EY. 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 . 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. Markets climbed higher still, awash with central-bank-induced liquidity. 18% of APAC investors say that LPs demanding diversification and fierce competition against larger firms pose other significant fundraising challenges. Conclusion 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. Leapfrog tech potentially has the ability to further accelerate growth, thereby offering the opportunity for outsized returns. By Cameron Joyce, CFA and Michael Patterson. Fundraising results differed notably across geographies, more so than in previous years. As the industry narrative turned from beta to alpha, there was less alpha to be had in 2022. And multifamily and industrialsectors benefiting from changes in living and shopping behaviorsoftened after rapidly rising rents and occupancy of the past two years boosted performance (Exhibit 6). 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%). Companies with cutting-edge tech and design can be positioned for Asia and/or global expansion and sold at a premium valuation. Unsurprisingly, growth is a leading factor that makes Asia an appealing target for private investment capital. 22% of respondents say their firms are exploring digital technologies while 7% say their firms are close to making the final decision. 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. Anecdotally, as little as five years ago, many businesses in the region managed trucking logistics via paper on a clipboard. 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. January 31st, 2023. 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. 2022 will prove to be the best year yet for ESG-focused fundraising, with $24 billion raised through the first half of the year. Singapore: This material is disseminated by Morgan Stanley Investment Management Company and should not be considered to be the subject of an invitation for subscription or purchase, whether directly or indirectly, to the public or any member of the public in Singapore other than (i) to an institutional investor under section 304 of the Securities and Futures Act, Chapter 289 of Singapore ("SFA"); (ii) to a "relevant person" (which includes an accredited investor) pursuant to section 305 of the SFA, and such distribution is in accordance with the conditions specified in section 305 of the SFA; or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. Digital innovation and transformation across existing workflows are imperative for PE firms wishing to maintain a competitive edge among peers. research www.capitaliq.spglobal.com, [5] Investing in the next generation of healthcare opportunities. 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. S&P Global Market intelligence. McKinsey research to be published. Das Naes Unidas 14401, Torre Hotel Chcara Santo Antnio So Paulo, BR-SP. Datenschutz 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. MSIM announced today that the 1GT climate private equity strategy (1GT) co-led a $50 million Series B funding round for Everstream alongside existing investors StepStone Group and Columbia Capital. 2 Preqin, data as of September 2022. Environmental issues and regulations, lack of financing and raw materials, logistics and high valuations are other topics of concern on investors minds. 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. [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. (As of 09/09/2021). In total we received 357 responses from PE and VC investors globally. Source: AVCJ Research, as of 31 December 2022. Registered Office: Beethovenstrasse 33, 8002 Zurich, Switzerland. Global PE performance turned negative for the first time since 2008, posting a 9 percent return through September1As measured by year-to-date IRR as of September 30, 2022, for global funds vintages between 2000 and 2019. and ending a five-year run as the highest-performing private asset class. 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. equity, real assets, and debt capital markets. After more than a decade of rapid fundraising growth, strong macroeconomic headwinds slowedbut did not stopprivate debts growth. 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. Stay ahead in a rapidly changing world. 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. As an investment advisory fee for an IAA or an IMA, the amount of assets subject to the contract multiplied by a certain rate (the upper limit is 2.16% per annum (including tax)) shall be incurred in proportion to the contract period. Amid the challenges, public markets sold off substantially, and though private markets remained relatively buoyant in the first half of 2022, they followed in the latter half. 12 Weforum.org How reform has made Chinas state-owned enterprises stronger October 2020. A pre-investment ESG diligence includes a materiality scan, ESG performance and benchmark, value-at-stake analytics, and an ESG maturity assessment. 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. We asked the CEO of Moonfare what it takes to get ordinary investors up to speed and investing in private equity with confidence. From 2021 to 2022, total PE fundraising activity dropped around $100 billion with the top 10 closed funds representing nearly a third of total funds raised, according to PitchBook's 2022 Annual Global Private Market Fundraising report. A Private Equity Lens on the Energy Transition The global shift away from carbon-based fuels is gaining momentum. Like the strategies for other asset classes, infrastructure and NR strategies were affected by macroeconomic challenges. 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. 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. 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). However, many are cautious of the growing inflation and rate hikes that may impede the unprecedented rate of investment activity. Real estate (23 percent) and private equity (15 percent) declined most precipitously from 2021s record highs, while private credit (+2 percent) proved more resilient. 2021 PREQIN GLOBAL PRIVATE EQUITY & VENTURE CAPITAL REPORT - SAMPLE PAGES 1. Beyond China (which is currently facing its own challenges), leapfrog potential exists in other parts of Asia. Open-end funds in the US grew NAV by 24 percent, with contributions exceeding distributions for the first time in two years. 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. [14], Private Equity firms gradually catching the digitalization train. The third risk factor concerning PE/VC firms this year has changed considerably from last year. The decline was most evident in Europe and Asia, while fundraising in North America increased slightly (Exhibit 1). For illustrative purposes only.[8]. McKinseys Private Markets Annual Review: 2017 to 2022. This is up from 51% in 2021, indicating that its attractiveness continues to grow year-on-year. On average, 56% of respondents believe deal activity will improve in the next 12 months. 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. [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. 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. In almost every regard, 2021 was an exceptional year (as we highlightedin last years report) but it was not a trend breaker. In the private markets, first-half deal activity softened but subtly so, nearly matching the record-setting pace set in 2021. Interest rates stayed low, credit availability was high, and valuations rose consistently. 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. 37% think it will remain the same, a slight increase over 2021 when only 27% of investors expected deal activity to remain flat. 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. Performance also declined from 2021s high as lower marks offset current yield gains. Welcome to Preqin's first ever Global Alternatives Report dedicated solely to Venture Capital. Since 2017, fundraising in Asia has declined 16 percent per year, driven primarily by reduced investment in China. Compared with a heady prior decade of robust growth, 2022 was a subdued year in the private markets. First-time fund launches also decreased by 40 percent. Exit activity bounces back and set for another active year. The 2022 Preqin Global Alternatives Reports are the most complete and in-depth annual reviews of private equity, venture capital, private . Together, we achieve extraordinary outcomes. Fundraising hit a new record in 2021 with established fund managers riding the wave. Concerns over start-ups' high burn rate and limited exit options caused by a global equity sell-off have extended funds' holding periods and slowed capital distribution. 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%). Too many business leaders lack a clear understanding of profitability, but a few organizations are visualizing profits in startling detail. 7 An efficient market is one where the market price is an unbiased estimate of the true value of an investment. Since these charges and expenses are different depending on a contract and other factors, MSIMJ cannot present the rates, upper limits, etc. S&P Global. Signs of a flight to quality, or at least to better-known managers, emerged. Principles for Responsible Investment, annual report, 2022. 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. Die auf dieser Website beschriebenen Dienstleistungen sind unter Umstnden nicht in allen Rechtsgebieten oder fr alle Kunden verfgbar. 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). Going into 2022, PE/VC investors are mainly concerned about the changes to the economic environment. 37 How are increasing LP sophistication and diversification shaping the industry and the types of services GPs need to offer? This progress is a result of many factors. Capital deployments into larger vehicles increased as investors re-upped with existing managers while forgoing commitments to smaller and newer managers. 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. In total, 2,543 funds held a final close, a 14% increase on the previous years tally. 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. IPOs remain the first choice of exit methods among APAC investors (39%), and it is also increasingly attractive to LatAm investors, rising to 22% from only 4% last year. Bain's Nirad Jain and Kara Murphy share insights from our annual report. Global private markets fundraising declined by 11 percent to $1.2 trillion. 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. Performance of every private markets asset class declined relative to 2021 but continued to outperform public market equivalents at current marks, though private market valuation changes often lag those in public markets. Almost 17% of PE professionals from that region anticipate the investment landscape will deteriorate in 2022. Labor shortages in the wake of the pandemic are undoubtedly playing a role in the overall picture. 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. 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. The definition of infrastructure and natural resources continues to expand, with todays funds now taking more equity risk than yesteryears did. in advance. 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%). 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. However, the overall number of firms not considering ESG factors when looking for new investments remained unchanged from last year at approximately 20%. 410 (Director of Kanto Local Finance Bureau (Financial Instruments Firms)), Membership: the Japan Securities Dealers Association, The Investment Trusts Association, Japan, the Japan Investment Advisers Association and the Type II Financial Instruments Firms Association. France: MSIM FMIL (Paris Branch), 61 rue de Monceau 75008 Paris, France. 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. On aggregate those funds raised $845.5 billion capital across various strategies, with growth capital funds seeing the largest upsurge. Screening results include only M&A Exits not IPOs. In the EU, MSIM and Eaton Vance materials are issued by MSIM Fund Management (Ireland) Limited (FMIL). Retrieved from: https://www.ey.com/en_us/private-equity/pulse, [10] Key Trends that will drive the ESG agenda in 2022. Trial by fire: Indian PE ecosystem resilient in a globally challenging year. Market Intelligence Registered in England. 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. The Market Monitor series includes a wide array of market charts and views to guide your investing discussions. The diversity of strategies within private debt also helps explain its consistent growth. Real estate deal volume declined 20 percent to $1.1 trillion, also the second-highest year on record. This has played out among Korean tech companies where early-stage investments are limited to local VCs, keeping valuations modest. (As of 20/01/2022). [11] S&P Capital IQ Pro Platform (as of 25/01/2022). It has been a positive year for ESG with a broad recognition of ESGs importance from all stakeholders and acknowledgement of its role in value creation. Here's what it means for private investors. 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. current macroeconomic and geopolitical events are creating short-term pressure on high-growth sectors such as telecommunications and renewables. By just about any measure, private equity set a remarkable new standard in 2021. a new high. The flow of capital into the asset class has pushed investors to look beyond traditional core infrastructure assets (Exhibit 10). Finally, amid the broader slowdown in technology-oriented PE deal making, investments in property technology companies fell to the lowest total in five years. 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. The Covid-19 pandemic re-emphasized the importance of localized operations, as closed borders made it impossible for non-local managers to undertake transactions. Because of the deterioration in technology valuations, VC and growth equity returns led the fall, in stark contrast to the last several years. Outside the EU, MSIM materials are issued by Morgan Stanley Investment Management Limited (MSIM Ltd) is authorised and regulated by the Financial Conduct Authority. 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. Disallowed Products Our Products Preqin Pro Alternative assets data platform Insights+ For more from Dry Powder on the report, you can listen to Three Essential Trends . At $2.5 Bn, MSIM Raises One of the Largest Funds Focused on Single Asset GP-Led Continuation Vehicles. 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. 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. Going into 2022, PE investors remain largely bullish on the investment activity outlook. Its 2022, and were coming off an extremely busy year in private equity. The number of buyout and growth deals greater than $500 million decreased by 33 percent. 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). As institutional capital gravitates toward massive generalist private market managers with well-established . 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. 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. SPACs are playing a new role in the market dynamics, particularly in the U.S. 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. 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. 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. 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. For more from Dry Powder on the report, you can listen to Three Essential Trends. Economic environment at the forefront of risk concerns. [14] S&P Capital IQ Pro Platform (as of 14/02/2022). 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. This can lead to less friction as industries grow. 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. 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). 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. Many attributes of businesses located in Asia are well-suited to operational improvements that can both further growth and increase margins. Stay on top of today's volatile markets with these timely resources. The growth rate was lower Private markets have enjoyed strong tailwinds since the depths of the Global Financial Crisis (GFC). 2 Preqin, data as of September 2022. The research defines outperformers as companies whose score on a series of assessed ESG metrics improved over time. [8] Multiple selections were allowed. 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. 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). 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. On some diversity metrics, private markets firms compare favorably with corporate America, although ethnic diversity is not yet broad based. 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. Only 13% of respondents anticipate fundraising conditions to deteriorate. No representation or warranty is made as to future performance or such forward-looking statements. 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. 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. Download the Complimentary Report. Exit volume fell sharply, as sponsors chose to hold assets rather than sell into a declining-valuation environment. Private equity funds continued to deliver returns outpacing any other asset class. 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. 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. Italy: MSIM FMIL (Milan Branch), (Sede Secondaria di Milano) Palazzo Serbelloni Corso Venezia, 16 20121 Milano, Italy. LPs concentrated commitments among large funds as many investors chose to re-up with known, tested names while forgoing commitments to smaller, newer managers.

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