2022 preqin global private equity venture capital report

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. European investors appear to have the most confidence about the industrys outlook, with 98% predicting that deal-making activity will either improve or remain the same. Valuation multiples have been falling across both public and private markets, with venture capital positions arguably the most . Registered in England. Infrastructure and natural resources (NR) overcame broader market headwinds in 2022 to set a new fundraising record of $158 billion (Exhibit 9). Total private markets assets under management (AUM) reached $11.7 trillion as of June 30, 2022. The 2022 Preqin Global Private Equity Report offers the industry's most complete and in-depth annual review. Automating these manual, inefficient processes are potential easy-wins to improve efficiency. Morgan Stanley does not render tax advice on tax accounting matters to clients. More than three-quarters of firms (77%) say they are planning to exit their portfolio companies, marking an increase from last year (66%). 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. S&P Global Market intelligence. /pub/content/dam/im/json/imwebdata/im/data/misc/translation/translation.json, /pub/content/dam/im/json/imwebdata/im/data/misc/translation/aggTranslation.json. 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. 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. More than half of respondents (58%) highlighted it as the top risk factor to their portfolio. This material is only intended for and will only be distributed to persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations. It conducted a debut survey of firms in this sector, gathering professional insights and opinions on how they are likely to fare in 2022 in terms of fundraising, dry powder, regulations, ESG considerations, private equity operations, investing areas, strategies, outsourcing, valuations and exits. Datenschutz Compared with a heady prior decade of robust growth, 2022 was a subdued year in the private markets. 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. Retrieved from: https://pages.marketintelligence.spglobal.com/2021-Year-in-Review-Investment-Banking-Infographic.htm. NOT FDIC INSURED | OFFER NO BANK GUARANTEE | MAY LOSE VALUE | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY | NOT A DEPOSIT. The diversity of strategies within private debt also helps explain its consistent growth. Nutzungsbedingungen. 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. Vintage years beyond 2017 have been excluded as performance is less mature and may be too early to tell. In office, for example, net absorption turned positive as attendance rates seemingly reached a new equilibrium. In almost every regard, 2021 was an exceptional year (as we highlightedin last years report) but it was not a trend breaker. 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). And it's no wonder why, with its record performance in 2021. AUM has now grown at an annual rate of nearly 20 percent since 2017. Gbenga Oladeji oversees Global Private Markets for Johnson & Johnson Benefits Investment team. Investors flocked to the asset class because of its ability to provide stable cashflows, less correlated returns, and a hedge against inflation. Like deal-making, fundraising also saw an upward growth trajectory in 2021 as money flew abundantly into private markets. Clients should always consult with a legal or tax advisor for information concerning their individual situation. 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. 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. Today on Dry Powder, well cover the essential indicators of 2021, which can inform your strategy in 2022 and beyond. Here's what it means for private investors. Exits in the region are notoriously complicated, as tighter public markets limit IPO options and geopolitical uncertainty clouds valuations. 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. Many attributes of businesses located in Asia are well-suited to operational improvements that can both further growth and increase margins. 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. Performance also declined from 2021s high as lower marks offset current yield gains. But whether the exit activity will be on par with that of 2021 remains to be seen, and may hinge on looming economic risks. 314182, which accept responsibility for its contents. 37 How are increasing LP sophistication and diversification shaping the industry and the types of services GPs need to offer? Retrieved from: https://www.spglobal.com/esg/insights/key-esg-trends-in-2022. 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). 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. 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. The market environment in the next few years will present further dislocation and opportunity for fundamental value creation. Get the long story short in the latest episode of our Dry Powder podcast. 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 advance. 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. [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. Almost 17% of PE professionals from that region anticipate the investment landscape will deteriorate in 2022. The growth rate was lower Each year since its inception, this annual publication has discussed new records in fundraising and deal flow while celebrating strong performance across asset classes. In Switzerland, MSIM materials are issued by Morgan Stanley & Co. International plc, London (Zurich Branch) Authorised and regulated by the Eidgenssische Finanzmarktaufsicht (FINMA). www.capitaliq.spglobal.com, [5] Investing in the next generation of healthcare opportunities. Even in 2020, when activity stalled briefly during the early months of the COVID-19 pandemic, private markets hummed again in the second half. A United Nations-supported network of investors promoting sustainable investment. High inflation persisted throughout most of 2022, prompting central banks around the world to increase interest rates at a historic pace. Political upheaval (26 %) and the high speed of technological changes (20%) round off the top five risk factors. Anecdotally, as little as five years ago, many businesses in the region managed trucking logistics via paper on a clipboard. [14] S&P Capital IQ Pro Platform (as of 14/02/2022). 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. Spain: MSIM FMIL (Madrid Branch), Calle Serrano 55, 28006, Madrid, Spain. Banks began to pull back, unwilling or unable to lend. Source: Preqin Pro as of September 30, 2022, COPYCAT MODELS ACCELERATING GROWTH 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). 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. Fundraising results differed notably across geographies, more so than in previous years. 11 Bain & Company, "Asia-Pacific Private Equity Report 2022". [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. The complexity and idiosyncrasies of Asian markets usually result in greater opacity to valuations. 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). The client shall delegate to MSIMJ the authorities necessary for making investment. Please read and agree to the Privacy Policy. Subscribe to Bain Insights, our monthly look at the critical issues facing global businesses. While fundraising and investment performance declined, the industrys growth held reasonably steady, with assets under management increasing to $11.7 trillion as of June 30, 2022 (Exhibit 2). Please consider the investment objectives and nature of risks before investing. By Cameron Joyce, CFA and Michael Patterson. This paper covers a few of the drivers of outperformance in Asiaaccelerated and leapfrog growth, valuation arbitrage and efficiency improvementand why these observed characteristics make the Asian market particularly attractive. current macroeconomic and geopolitical events are creating short-term pressure on high-growth sectors such as telecommunications and renewables. 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). For example, while China tech was initially a copycat play, Chinas Internet sector has surpassed the U.S. in several areas (e.g., mobile payments, online shopping). Add-on deals, which tend to be smaller, continued to gain share as a percentage of total deals. 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. 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. ESG still clearly faces challenges in its implementation, such as the lack of standardized performance reporting, and will certainly require time before all companies can be on board. Example: 70% of all Europe-based investors responded that they are planning of making investments in Software & Services. 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. 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. [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. The deal-making momentum of 2021 continued through the first half of 2022, and despite the striking slowdown in second-half deal activity, 2022 remained the second most active year on record. We work with ambitious leaders who want to define the future, not hide from it. Office, retail, and hospitalitythe sectors most affected by pandemic-driven changes in working, shopping, and travelingshowed signs of emerging stability. The research defines outperformers as companies whose score on a series of assessed ESG metrics improved over time. Registered Office: Beethovenstrasse 33, 8002 Zurich, Switzerland. European firms seem to lead the pack, with 27% saying they have either fully implemented digital technologies or are in the advance stages; by comparison, only 20% of North American investors are in the same stage. Conclusion OPAQUE ENTRY VALUATIONS McKinsey research to be published. As overall GDP growth slows, efficiency improvement will become increasingly more important. 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. In Asia overall, family businesses and small and medium enterprises make up 85- 90% of companies.13 Many of these businesses operate at low margins due to limited implementation of systems and technology. [14], Private Equity firms gradually catching the digitalization train. 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. Direct lending fundraising declined from 2021, but only marginally, raising over $100 billion for the second consecutive year. [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). 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. 43% were Private Equity Firms, 29% were Venture Capital firms and 28% were firms doing both Private Equity and Venture Capital investments. 37% think it will remain the same, a slight increase over 2021 when only 27% of investors expected deal activity to remain flat. 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. A defining characteristic of Asian markets is the way geopolitical and cultural factors inform how business is done. The prevailing market uncertainty also served as a shot in the arm for private credit deployment opportunities. Deal volume fell 20 percent, declining in each consecutive quarter throughout the year (Exhibit 5). 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). In unserem monatlichen Global Equity Observer finden Sie unsere Gedanken zu weltweiten Ereignissen aus Sicht unseres qualitativ hochwertigen Anlageprozesses. Quantitative tightening and dislocation in asset prices raised fears of an economic slowdown. 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. Vintage years beyond 2017 have been excluded as performance is less mature and may be too early to tell. 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. The research defines outperformers as companies whose score on a series of assessed ESG metrics improved over time. Since these charges and expenses are different depending on a contract and other factors, MSIMJ cannot present the rates, upper limits, etc. (As of 09/09/2021). 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. Yet, high-quality assets in segments where there is perceived scarcity value can often achieve premium valuations at exit. 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. 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. 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. Amid current financial market volatility, investors are revisiting asset allocations in their portfolios, hoping to identify attractive market segments with upside potential. Bookmark content that interests you and it will be saved here for you to read or share later. 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. Dieses Dokument ist ein Marketingdokument. 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. MSIM announced today that it has held the final close of Ashbridge Transformational Secondaries Fund II (Ashbridge II) at $2.5 billion of total capital commitments. Investors looking to Asia usually ask, Can I expect a risk premium? In short, yesat least based on MSIMs analysis. The mood changed in early summer. LPs want more transparency, data points around . 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. Australia: This material is disseminated in Australia by Morgan Stanley Investment Management (Australia) Pty Limited ACN: 122040037, AFSL No. . TECH AS A LEAPFROG OPPORTUNITY Unsurprisingly, growth is a leading factor that makes Asia an appealing target for private investment capital. Finally, macroeconomic forces, including higher energy prices and geopolitical conflict, have strengthened long-term investor interest in alternative energy sources and overall energy independence. 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. Beyond robust GDP growth, under-penetration in many sectors creates opportunity for accelerated growth. 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%). Infrastructure and natural resources grow and evolve, Private markets advance their ESG agendas. 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. On the supply side, the closing of a record number of global megafunds boosted fundraising. equity, real assets, and debt capital markets. 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. Yet, like most private market segments, real estate experienced a downturn in 2022 compared with the record year it followed. The article was edited by Arshiya Khullar, an editor in the Gurugram office. Disallowed Products Our Products Preqin Pro Alternative assets data platform Insights+ 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. This year we also included a question on investors advances on their digitization and automation journey. In 2022, mezzanine strategies were most in favor, posting record fundraising totals and more than tripling 2021s haul. Private equity surged ahead with soaring deal and exit values. document.write(new Date().getFullYear()); MorganStanley.Alle Rechte vorbehalten. 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. 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. Trial by fire: Indian PE ecosystem resilient in a globally challenging year. 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. 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. 5 Source: Statista, data as of June 2022. Credit Card Penetration defined as percentage of people 15+ who use credit cards. Ethnic, racial, and gender representation also remains imbalanced in senior positions and investing roles, suggesting that firms broadly continue to miss talent opportunities. The Market Monitor series includes a wide array of market charts and views to guide your investing discussions. More private markets managers are incorporating considerations for ESG factors into their corporate policies, operating procedures, and investment decisions. Source: S&P Capital IQ as of 28 February 2023. Notably, 40% of respondents from North America and 26% from Europe claim that they dont face any major challenges, while only 11% of LatAm investors and 13% of Middle East investors feel the same. 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. The table below indicates the fund types Preqin considers as constituting each asset class. AUM grew as well, reaching a new high of $1.3 trillion, 14.2 percent higher than in 2021. 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. 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). Together, we achieve extraordinary outcomes. In our podcast series, Bain's Hugh MacArthur interviews leading experts on the trends and opportunities that will redefine the private equity industry. Eine zeitgerechte Analyse markt-verndernder Ereignisse und deren Wirkung auf das Anlageumfeld. 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). The 2022 Preqin Global Alternatives Reports are the most complete and in-depth annual reviews of private equity, venture capital, private . 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). 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. 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. By contrast, Asia-Pacific (APAC) respondents maintain the most cautious view. 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. The definition of infrastructure and natural resources continues to expand, with todays funds now taking more equity risk than yesteryears did. In 2022, 1,069 more investors committed to the United Nations Principles for Responsible Investment (PRI)3A United Nations-supported network of investors promoting sustainable investment., and a further 88 asset owners became PRI signatories, bringing the total to 681.4Principles for Responsible Investment, annual report, 2022. 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. For more from Dry Powder on the report, you can listen to Three Essential Trends. And the ongoing war and humanitarian crisis in Ukraine further exacerbated risks to the global economy, including higher commodity prices and disrupted supply chains. Investing in Asian private equity comes with a unique set of challenges and risks beyond what this paper has explored. 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). 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. Each MSIM affiliate is regulated as appropriate in the jurisdiction it operates. Going into 2022, PE investors remain largely bullish on the investment activity outlook. Private debt fundraising continued to grow last year (+2 percent), once again bucking the trend of other private asset classes. 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. Amid current financial market volatility, investors are revisiting asset allocations in their portfolios, hoping to identify attractive market segments with upside potential. Bain's Global Private Equity Report examines the industrys strengths, its challenges, and the evolutionary path that lies ahead. Stay ahead in a rapidly changing world. Changes is slowest in the Middle East and Africa where 18% of investors have yet to embark on digital revolution at all. This can lead to less friction as industries grow. Welcome to Preqin's first ever Global Alternatives Report dedicated solely to Venture Capital. Key Takeaways For illustrative purposes only. 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. 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. Private equity funds continued to deliver returns outpacing any other asset class. 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. Predictz Today Forebet, Articles OTHER