private equity fundraising: operational excellence in the mid-market

FUNDRAISING: OPERATIONAL EXCELLENCE IN THE MID-MARKET

Online Roundtable Discussion

Private Equity Fundraising: Operational Excellence in the Mid-Market

Organised by:


AGENDA

I. INTRODUCTIONS

II. PRIVATE CAPITAL TRENDS

III. OPERATIONAL EXCELLENCE

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INTRODUCTIONS

James HaluszczakFounder & Managing Partner

Recognized industry-leading advisor

to Private Capital GPs and LPs

Frequent industry speaker

18 years of experience in Private

Capital operations, finance, portfolio

value creation, and technology roles

Todd HaringPartner, Head of US Services

Expert in system implementations,

data migration, strategic planning,

and data modeling & analysis

Lead over 125 technology related

implementations

18 Years of experience servicing

clients in Private Capital

Chris FergusonChief Executive

Head of Preqin’s software offerings

Past experience in sustainable

investing and operations for lower

mid market growth/buyout fund

CA (SA) through Ernst & Young

Andrew KehlHead of Business Development

Manage global sales and client

development effort

8 years experience in private fund

client services

Chartered Alternative Investment

Analyst

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Source: 2017 Preqin Global Alternatives Reports

PRIVATE CAPITAL TRENDS: Private Capital AUM at a record high - $4.5tn

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PRIVATE CAPITAL TRENDS: Another good year for fundraising

0

100

200

300

400

500

600

700

800

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Agg

rega

te C

apit

al R

aise

d (

$b

n)

Annual Aggregate Private Capital Raised by Asset Class, 2004 - 2016

Natural Resources

Infrastructure

Private Debt

Real Estate

Private Equity


5


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Jun-16

Dry

Po

wd

er (

$b

n)

Private Capital Dry Powder over Time by Asset Class, 2005 - 2016

Natural Resources

Infrastructure

Real Estate

Private Debt

Private Equity

PRIVATE CAPITAL TRENDS: Now record levels of capital available to invest


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PRIVATE CAPITAL TRENDS: Returns falling across Private Capital

-5%

0%

5%

10%

15%

20%

25%

30%

1 Year toJun-13

1 Year toDec-13

1 Year toJun-14

1 Year toDec-14

1 Year toJun-15

1 Year toDec-15

1 Year toJun-16

Med

ian

An

nu

aliz

ed R

etu

rn

Rolling One Year Private Capital Horizon IRRs

Real Estate

Buyout

Venture Capital

Mezzanine PrivateEquity

Distressed PrivateEquity


Private Capital returns not immune to broader market slowdown

Buyout remains the most resilient fund type

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PRIVATE CAPITAL TRENDS: Private Capital outperformed in the long term

Longer term, Private Capital has significantly exceeded public markets

Majority of investors expectations remain at +400 basis points on public markets

Returns and diversification attributes are the primary drivers of allocations

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PRIVATE CAPITAL TRENDS: Continued investor interest in Mid-Market Buyout

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• Small to mid market buyout clearly the stand out segment –consistent with prior years

0% 10% 20% 30% 40% 50% 60% 70%

Other

Secondaries

Fund of Funds

Growth

Large to Mega Buyout

Venture Capital

Small to Mid-Market Buyout

Proportion of Respondents

Fund Types* that Investors View as Presenting the Best Opportunities

Source: Preqin Investor Outlook Jan 2017


PRIVATE CAPITAL TRENDS: Mid-Market Buyout net distributions by region

Source: Preqin Performance Analyst Database

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0% 20% 40% 60% 80% 100%

Infrastructure

Real Estate

Hedge Funds

Private Equity

Fundraising Climate Today vs. 12 Months Ago

More Challenging No Change Less Challenging

926

322 343

238

355

90137

39

North America Europe Asia Rest of the World

Private equity funds in market by primary geographic focus (as at January 17)

Nº of Funds Raising Aggregated Capital Targeted ($bn)

PRIVATE CAPITAL TRENDS: Fundraising is more competitive than ever


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Private Equity Private Debt Real Estate Infrastructure Natural Resources

Valuations Valuations Valuations ValuationsOngoing

Volatility/Uncertainty in Global Markets

Exit Environment FundraisingOngoing

Volatility/Uncertainty in Global Markets

Deal Flow Fundraising

Ongoing Volatility/Uncertainty

in Global MarketsDeal Flow Fundraising

Ongoing Volatility/Uncertainty

in Global Markets

Public Perception of Industry

PRIVATE CAPITAL TRENDS: Key challenges for Private Capital fund managers in 2017


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PRIVATE CAPITAL TRENDS: Operational Excellence is a key challenge for private capital investors in 2017

Source: Preqin Investor Survey, Due Diligence and Portfolio Monitoring Process – April 2016

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KEY TAKEAWAYS: Macro trends and concerns

Private capital markets continue to perform well

Investors continue to focus on Mid-Market Buyout

But…it’s not business as usual

More funds are in the market than ever

Fundraising is more challenging than ever

Annualized returns are falling

Valuations is a major concern for fund managers

Operational Excellence is a major concern for investors

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Operational Excellence is a key component considered by investors when making investment decisions, fund managers must take action to stay relevant in a competitive fundraising environment.

What is Operational Excellence?

Repeatable processes for efficient fund management and portfolio company value creation

Trained and stable team to maintain continuity and build experience

Infrastructure in place for thorough performance reporting and tracking

Sound risk and compliance policies and controls

Cyber security and data privacy

OPERATIONAL EXCELLENCE: What is it and how does this help fundraising?

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Source: 2016 EY Global Private Equity Fund and Investor Survey


More data-driven that enhances analytics and reporting

Benefits of using portfolio company data

What types of data are being received

Challenges of obtaining

Steps to overcome

OPERATIONAL EXCELLENCE. Data Challenges for GPs: Portfolio Company Data

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Source: 2017 EY Global Private Equity Survey


Secure and immediate accessibility

Online data portals

Three key goals:

Streamline the fundraising workflow

Control what data is being distributed

Enhancing the GP’s servicing capabilities

OPERATIONAL EXCELLENCE. Data Challenges for GPs: Access

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% of LP’s preferring to receive reports through digital portals

Source: 2017 EY Global Private Equity Survey


OPERATIONAL EXCELLENCE. Data Challenges for LPs: Making Decisions on Differing GP Data

73% of LPs struggle to make informed decisions when comparing differing GPs data

What solutions are being deployed:

ILPA DDQ

Other solutions

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Source: 2016 eVestment LP DD Trends


Ownership of fund vs. ownership of portfolio company

Ways to obtain information

Solutions

What insight is derived from obtaining this data?

Should LP’s have access to this information?

OPERATIONAL EXCELLENCE. Data Challenges for LPs: Value in Portfolio Company Data

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private equity fundraising: operational excellence in the mid-market

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