[8] Multiple selections were allowed. Even in 2020, when activity stalled briefly during the early months of the COVID-19 pandemic, private markets hummed again in the second half. Private markets deal volume plummeted, performance declined, and valuations felldramatically in certain sectors. TECH AS A LEAPFROG OPPORTUNITY Unser aktueller Artikel aus der Reihe Tales from the Emerging World gewhrt Einblicke in neue Trends in den Schwellenlndern. Registered in England. The growth rate was lower 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). 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. Weitere Einzelheiten knnen aus unseren Nutzungsbedingungen entnommen werden. [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. MSIM, the asset management division of Morgan Stanley (NYSE: MS), and its affiliates have arrangements in place to market each others products and services. Registered Office: 25 Cabot Square, Canary Wharf, London E14 4QA. Considerations for diversity, equity, and inclusion (DEI) have become an important part of the fundraising, hiring, and investing landscape in private markets. Global Private Equity Report [7] S&P Capital IQ Pro Platform (as of 27/01/2022). 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. 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. 37 How are increasing LP sophistication and diversification shaping the industry and the types of services GPs need to offer? Example: 70% of all Europe-based investors responded that they are planning of making investments in Software & Services. The market environment in the next few years will present further dislocation and opportunity for fundamental value creation. 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. 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%). 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. This document is disseminated in Japan by MSIMJ, Registered No. While the long-term demand for capital is tremendous, with a projected global infrastructure spending gap of $15 trillion through 2030,2McKinsey. Fundraising hit a new record in 2021 with established fund managers riding the wave. 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. And it's no wonder why, with its record performance in 2021. Here's what it means for private investors. Under-penetration of financial services and modern retail presented an opportunity for China to develop more advanced solutions than what existed in the West. Principles for Responsible Investment, annual report, 2022. 2022 is likely to be an active year for private equity exits, and many investors are preparing to divest their portfolio companies. Calvert Research and Management is exempt from the requirement to hold an Australian financial services licence in accordance with class order 03/1100 in respect of the provision of financial services to wholesale clients in Australia. Investing in Asian private equity comes with a unique set of challenges and risks beyond what this paper has explored. /marketintelligence/en/news-insights/research/2022-global-private-equity-outlook Die auf dieser Website beschriebenen Dienstleistungen sind unter Umstnden nicht in allen Rechtsgebieten oder fr alle Kunden verfgbar. 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. 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. On the surface, historical private equity (PE) performance in Asia has been shown to be on par with performance numbers generated in other regions. A pre-investment ESG diligence includes a materiality scan, ESG performance and benchmark, value-at-stake analytics, and an ESG maturity assessment. This can lead to less friction as industries grow. 22% of respondents say their firms are exploring digital technologies while 7% say their firms are close to making the final decision. 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. www.preqin.com, [4] S&P Capital IQ Pro Platform (as of 27/01/2022). Why Invest in Asian Private Equity? The Case for Outperformance 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. 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. 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. Bookmark content that interests you and it will be saved here for you to read or share later. 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). Valuation multiples have been falling across both public and private markets, with venture capital positions arguably the most . 2021 PREQIN GLOBAL PRIVATE EQUITY & VENTURE CAPITAL REPORT - SAMPLE PAGES 1. Hong Kong: This material is disseminated by Morgan Stanley Asia Limited for use in Hong Kong and shall only be made available to "professional investors" as defined under the Securities and Futures Ordinance of Hong Kong (Cap 571). Japan: For professional investors, this document is circulated or distributed for informational purposes only. This has the knock-on effect of weakening fundraising, and we . Paired with lower valuations public market valuations trading as much as 40-50% lower than the US on a P/E basis,8 and private markets valuations that have almost halved from their peak9 there should be a particularly attractive opportunity at hand. The 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. 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. www.capitaliq.spglobal.com, [5] Investing in the next generation of healthcare opportunities. 2 Preqin, data as of September 2022. in advance. Eine monatliche Publikation mit den neuesten Einblicken des Global Multi-Asset Teams zum Wirtschafts- und Marktumfeld und zur optimalen Portfoliopositionierung. Investors looking to Asia usually ask, Can I expect a risk premium? In short, yesat least based on MSIMs analysis. In total we received 357 responses from PE and VC investors globally. Real estate (23 percent) and private equity (15 percent) declined most precipitously from 2021s record highs, while private credit (+2 percent) proved more resilient. Datenschutz (As of 13/01/2022). By just about any measure, private equity set a remarkable new standard in 2021. Amid current financial market volatility, investors are revisiting asset allocations in their portfolios, hoping to identify attractive market segments with upside potential. While the industry continues to digitize rapidly, companies leading that effort found fundraising more difficult than in years past. 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. In the EU, MSIM and Eaton Vance materials are issued by MSIM Fund Management (Ireland) Limited (FMIL). Subscribe to Bain Insights, our monthly look at the critical issues facing global businesses. Since 2017, fundraising in Asia has declined 16 percent per year, driven primarily by reduced investment in China. Increasing representation across all levels will require managers to take fresh approaches to hiring, retention, and promotion. All clients should read the Documents Provided Prior to the Conclusion of a Contract carefully before executing an agreement. 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. For more from Dry Powder on the report, you can listen to Three Essential Trends . In the first half of 2022, central banks fought roaring inflation by sharply raising interest rates, and public market valuations cratered. Because of the deterioration in technology valuations, VC and growth equity returns led the fall, in stark contrast to the last several years. The five-year horizon internal rate of return (IRR) of 19.2% trails global private equity (20.8%), but the one-year return of 24.8% is some way above the 14.4% for private equity globally. 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. SCARCITY VALUE DRIVES SIGNIFICANT EXIT PREMIUMS S&P Global Market Intelligence. More than half of respondents (58%) highlighted it as the top risk factor to their portfolio. 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). 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. 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.1 MSIMs upcoming series on Why Invest in Asia Private Equity? will look to demystify the opportunity, starting out with The Case for Outperformance, which explores some of the drivers of outperformance including accelerated growth/leapfrog potential, valuation arbitrage, and the opportunity for company-level professionalization and efficiency improvement. Amid current financial market volatility, investors are revisiting asset allocations in their portfolios, hoping to identify attractive market segments with upside potential. 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. The research defines outperformers as companies whose score on a series of assessed ESG metrics improved over time. (As of 09/09/2021). In almost every regard, 2021 was an exceptional year (as we highlightedin last years report) but it was not a trend breaker. Global private markets fundraising declined by 11 percent to $1.2 trillion. 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%). Source: S&P Global Market Intelligence. Going forward, shifting macroeconomic conditions will make efficiency initiatives an increasingly important value driver in Asian private equity. 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. Natural resources strategies, meanwhile, generated relatively strong performance for a second consecutive year, buoyed by elevated commodity prices. Since these charges and expenses are different depending on a contract and other factors, MSIMJ cannot present the rates, upper limits, etc. In subsequent papers, the team will go into further depth on the region, covering topics such as the opportunity for venture capital in India and the current state of private equity in China. Add-on deals, which tend to be smaller, continued to gain share as a percentage of total deals. 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). 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. This has played out among Korean tech companies where early-stage investments are limited to local VCs, keeping valuations modest. 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. Investor strategy is backed by robust numbers: in 2021, IT accounted for nearly half of total deals completed (46%) and a third of total deal value (37%). Automating these manual, inefficient processes are potential easy-wins to improve efficiency. Going into 2022, PE/VC investors are mainly concerned about the changes to the economic environment. 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. 7 An efficient market is one where the market price is an unbiased estimate of the true value of an investment. 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. After more than a decade of rapid fundraising growth, strong macroeconomic headwinds slowedbut did not stopprivate debts growth. 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. 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 prevailing market uncertainty also served as a shot in the arm for private credit deployment opportunities. Quantitative tightening and dislocation in asset prices raised fears of an economic slowdown. Infrastructure and natural resources grow and evolve, Private markets advance their ESG agendas. Only 13% of respondents anticipate fundraising conditions to deteriorate. Exit volume fell sharply, as sponsors chose to hold assets rather than sell into a declining-valuation environment. Too many business leaders lack a clear understanding of profitability, but a few organizations are visualizing profits in startling detail. Deal volume fell 20 percent, declining in each consecutive quarter throughout the year (Exhibit 5). ITS NOT JUST THE PRICE 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. It's our market overview from Bain & Company's 2022 Global Private Equity Report. The decline was most evident in Europe and Asia, while fundraising in North America increased slightly (Exhibit 1). Globally, fundraising fell 15 percent from the all-time high achieved in 2021 (Exhibit 3). Eine zeitgerechte Analyse markt-verndernder Ereignisse und deren Wirkung auf das Anlageumfeld. 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. Global alternatives AUM forecast to double by 2026, topping $23 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. For more from Dry Powder on the report, you can listen to Three Essential Trends. Eine umfassende Bewertung wichtiger Trends, die das globale Anlagerisikoumfeld und unsere Portfolioallokationen beeinflussen. Funds over $5 billion collected a record $445 billion in aggregate, a 51 percent increase over funds of a similar size in 2021. Tighter financial conditions and general risk aversion continued to slow activity across the venture capital industry in the fourth quarter of 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. Catch new episodes by subscribing toDry PowderonApple Podcasts,Google Podcasts,Spotifyor wherever you may listen. Geographically, 45% of respondents were from Europe, 19% were from North America, 15% were from APAC, 8% were from the Middle East & Africa and 13% were from Latin America. Real estate deal volume declined 20 percent to $1.1 trillion, also the second-highest year on record. 12 Weforum.org How reform has made Chinas state-owned enterprises stronger October 2020. 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. Just 2,141 funds were closed during the year, 1,600 fewer than in 2021 and the fewest of any year since 2013. Please consider the investment objectives and nature of risks before investing. of the securities, and MSIMJ accepts such commission. This publication, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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. Expanding capitalization (cap) rates across sectors, which represent the multiple investors are willing to pay for net operating income (NOI), drove performance lower. The Netherlands: MSIM FMIL (Amsterdam Branch), Rembrandt Tower, 11th Floor Amstelplein 1 1096HA, Netherlands. At the same time, deal volume grew by 41.6% over 2020, proving that investors predictions of improved deal-making in 2021 came to fruition. Sponsored by. Infrastructure and natural resources fundraising rose to an all-time high of $158 billion, benefiting from the closing of a record five funds of more than $10 billion. In our podcast series, Bain's Hugh MacArthur interviews leading experts on the trends and opportunities that will redefine the private equity industry. 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. In total, 2,543 funds held a final close, a 14% increase on the previous years tally. The mood changed in early summer. As the industry narrative turned from beta to alpha, there was less alpha to be had in 2022. /pub/content/dam/im/json/imwebdata/im/data/misc/translation/translation.json, /pub/content/dam/im/json/imwebdata/im/data/misc/translation/aggTranslation.json. In particular, megafunds gained prominence: 11 funds of more than $10 billion each were raised, totaling $170 billion collectively (Exhibit 4). 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. A defining characteristic of Asian markets is the way geopolitical and cultural factors inform how business is done. 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. Today on Dry Powder, well cover the essential indicators of 2021, which can inform your strategy in 2022 and beyond. 8 Source: Bloomberg, data as of February 28, 2023. Private markets fundraising fell 11 percent to $1.2 trillion, as the denominator effect affected some LPs ability to allocate capital. 2021 was a record year for the PE industry as investment activity surpassed the trillion-dollar mark for the first time. 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. 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. Stay on top of today's volatile markets with these timely resources. Investors flocked to the asset class because of its ability to provide stable cashflows, less correlated returns, and a hedge against inflation. As institutional capital gravitates toward massive generalist private market managers with well-established . Spain: MSIM FMIL (Madrid Branch), Calle Serrano 55, 28006, Madrid, Spain. The article was edited by Arshiya Khullar, an editor in the Gurugram office. Source: S&P Capital IQ as of 28 February 2023. 11 Bain & Company, Asia-Pacific Private Equity Report 2022. [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). 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. 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). Nutzungsbedingungen. 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. *I have read thePrivacy Policyand agree to its terms. 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. 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. McKinsey Global Private Markets Review 2023 | McKinsey