private equity market update - caia · 2021. 4. 15. · global private equity fundraising, 2001 -...
TRANSCRIPT
Private Equity Market Update
Joseph Borda, CAIA
Senior VP, Research & Data Operations
4/15/21
2
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About Preqin
Data, solutions, and
insights for alternative
assets professionals.
Multi-award-winning
service.
Founded in 2003.
3
Today’s Agenda
Private Equity in 2020
How did the industry fair in 2020?
Opportunities & Investor Appetite in 2021
Where are Investors planning to allocate capital in H1 2021 &
beyond?
The Future of Alternatives
2025 Outlook and Projections
4
Private Equity Overview
AUM, Dry Powder, Fundraising & Deal Volume
5
Private Capital AUM Continues to Climb
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Dec-0
0
Dec-0
1
Dec-0
2
Dec-0
3
Dec-0
4
Dec-0
5
Dec-0
6
Dec-0
7
Dec-0
8
Dec-0
9
Dec-1
0
Dec-1
1
Dec-1
2
Dec-1
3
Dec-1
4
Dec-1
5
Dec-1
6
Dec-1
7
Dec-1
8
Dec-1
9
Sep-2
0
Asse
ts u
nd
er
Ma
na
ge
me
nt
($b
n)
Private Capital Assets under Management by Asset Class, 2000 - Q3 2020
Private Equity Real Estate Private Debt Infrastructure Natural Resources
8.1tn
+93%
6
Private Equity AUM Doubling Since 2015
752
1,591
1,633
3,459
0
1,000
2,000
3,000
4,000
5,000
6,000
Dec-0
0
Dec-0
1
Dec-0
2
Dec-0
3
Dec-0
4
Dec-0
5
Dec-0
6
Dec-0
7
Dec-0
8
Dec-0
9
Dec-1
0
Dec-1
1
Dec-1
2
Dec-1
3
Dec-1
4
Dec-1
5
Dec-1
6
Dec-1
7
Dec-1
8
Dec-1
9
Sep-2
0
Asse
ts u
nd
er
Ma
na
ge
me
nt
($b
n)
Private Equity Assets under Management, 2000 - Q3 2020
Dry Powder ($bn) Unrealized Value ($bn)
7
AUM Increase Driven by North America & Asia-Focused Vehicles
0
1,000
2,000
3,000
4,000
5,000
6,000
Dec-0
0
Dec-0
1
Dec-0
2
Dec-0
3
Dec-0
4
Dec-0
5
Dec-0
6
Dec-0
7
Dec-0
8
Dec-0
9
Dec-1
0
Dec-1
1
Dec-1
2
Dec-1
3
Dec-1
4
Dec-1
5
Dec-1
6
Dec-1
7
Dec-1
8
Dec-1
9
Sep-2
0
Asse
ts u
nd
er
Ma
na
ge
me
nt
($b
n)
Private Equity Assets under Management by Primary Geographic Focus, 2000 - Q3 2020
North America Europe Asia Rest of World
8
Asia-Focused AUM Experiences Exponential Growth Since 2015
388
468
639
880
1,163
1,378
0.0
200.0
400.0
600.0
800.0
1000.0
1200.0
1400.0
1600.0
Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Sep-20
Asia-Focused Private Equity Assets Under Management, 2000 – Q3 2020
9
Driven by Investor & Fund Manager Demand & Opportunities
10%
7%
23%
4%
8%
55%
25%
37%
8%
24%
7%
23%
17%
11%
38%
35%
50%
6%
0%
10%
20%
30%
40%
50%
60%
South America Central America Central & EasternEurope
Africa Middle East China India Southeast Asia Other EmergingMarkets
Pro
po
rtio
n o
f R
esp
on
de
nts
Emerging Markets that Will Present the Best Opportunities in 2021: Investors vs. Fund Managers
Investors Fund Managers
Source: Preqin Investor and Fund Manager Surveys, November 2020
10
Buyout & Venture Vehicles Account for +76% Market Share
2,485
1,361
819
385
0
1,000
2,000
3,000
4,000
5,000
6,000
Dec-0
0
Dec-0
1
Dec-0
2
Dec-0
3
Dec-0
4
Dec-0
5
Dec-0
6
Dec-0
7
Dec-0
8
Dec-0
9
Dec-1
0
Dec-1
1
Dec-1
2
Dec-1
3
Dec-1
4
Dec-1
5
Dec-1
6
Dec-1
7
Dec-1
8
Dec-1
9
Sep-2
0
Asse
ts u
nd
er
Ma
na
ge
me
nt
($b
n)
Private Equity Assets under Management by Strategy, 2000 - Q3 2020
Buyout Venture Capital Growth PE Other
11
Decrease in Funds Closed by ~20% Compared to 2019
736
652
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
0
500
1,000
1,500
2,000
2,500
3,000
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
2021 Y
TD
Ag
gre
ga
te C
ap
ita
l Rais
ed
($
bn
)
No.
Fu
nd
s C
lose
d
Year of Final Close
Global Private Equity Fundraising, 2001 - 2021 YTD
No. of Funds Closed Aggregate Capital Raised ($bn)
12
North America & Asia-Focused Funds Saw the Largest Decreases
0
500
1,000
1,500
2,000
2,500
3,000
3,500
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
2021 Y
TD
No.
Fu
nd
s C
lose
d
Year of Final Close
Private Equity Funds Closed by Primary Geographic Focus, 2001 - 2021 YTD
North America Europe Asia Rest of World
13
Capital Continues to Flow to Top Tier Managers & Funds
7% 7% 6% 5% 6% 6% 5% 4% 4% 3% 3%
29%24%
21% 22%24% 21% 21%
19%17% 16% 13%
21%
20%
15% 17% 15% 17%15%
14%
12% 15%13%
23%
22%
20%22% 21%
16% 21%
19%
20%25%
31%
20%27%
38%33% 34%
40% 37%43%
48%42% 41%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 YTD
Less than $100mn $100-499mn $500-999mn $1-2.5bn $2.5bn+
Source: Preqin Pro
Percentage of Aggregate Capital Raised by Fund Size, 2011 – 2021 YTD
14
Highest Average Proportion of Target Size Achieved at 105%
30%29% 29%
24% 23% 22%21% 24%
20%16%
25% 25% 23%
25% 27% 29%30%
36%38% 45%
22% 22%22%
23% 22%25% 25%
21%22% 21%
13% 11% 14%19% 20% 16% 18% 14% 17% 15%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Pro
po
rtio
n o
f F
un
ds C
lose
d
Year of Final Close
Private Equity Funds Closed by Proportion of Target Size Achieved,
2011 - 2020
Less than 50% 50-99% 100% 101-124% 125% or More
102%
100%
103%
105%
80%
85%
90%
95%
100%
105%
110%
0
2
4
6
8
10
12
14
16
18
20
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Ave
rag
e P
rop
ortio
n o
f Ta
rge
t Siz
e A
ch
ieve
d
Ave
rag
e T
ime
Sp
en
t in
Ma
rke
t (M
on
ths)
Year of Final Close
Private Equity Fundraising Success, 2011 - 2020
Average Time Spent in Market (Months) Average Proportion of Target Size Achieved
15
Private Equity-Backed Deals
0
100
200
300
400
500
600
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 YTD
Ag
gre
ga
te D
ea
l Va
lue
($b
n)
No.
of D
eals
Global Private Equity-Backed Deals, 2011 - 2021 YTD
No. of Deals Aggregate Deal Value ($bn) Source: Preqin Pro
16
Private Equity-Backed Deals by Sector
0
100
200
300
400
500
600
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Ag
gre
ga
te D
ea
l V
alu
e (
$b
n)
Aggregate Value of Private Equity-Backed Deals by Industry, 2011 - 2020
Business Services Consumer Discretionary Energy & Utilities Financial & Insurance Services Healthcare
Industrials Information Technology Raw Materials & Natural Resources Real Estate Telecoms & Media Source: Preqin Pro
17
Opportunities & Investor Appetite
18
Record Number of Funds in Market
4,627
898
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 2021 YTD
Private Equity Funds in Market, 2012 - 2021
No. of Funds Raising Aggregate Capital Targeted ($bn)Source: Preqin Pro
19
North America + Asia Account for ~74% by Aggregate Target Size
0
50
100
150
200
250
300
350
0
500
1000
1500
2000
2500
3000
Buyout VentureCapital
Growth PE Fund ofFunds
PESecondaries
Turnaround PE Other
Private Equity Funds in Market by Primary Strategy, Q1 2021
No. of Funds Aggregate Target Size ($bn)
0
50
100
150
200
250
300
350
400
450
0
500
1000
1500
2000
2500
3000
North America Europe Asia Rest of World
Private Equity Funds in Market by Primary Geographic Focus, Q1 2021
No. of Funds Aggregate Target Size ($bn)
20
Secondaries Fundraising Skyrocketed in 2020
0
10
20
30
40
50
60
70
80
0
10
20
30
40
50
60
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Ag
gre
ga
te C
ap
ital R
ais
ed
($b
n)
No.
of F
un
ds C
lose
d
Year of Final Close
Global Private Equity Secondaries Fundraising, 2000 - 2020
No. of Funds Closed Aggregate Capital Raised ($bn) Source: Preqin Pro
21
Secondaries Net IRRs vs. Standard Private Equity Strategies
0%
5%
10%
15%
20%
25%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Me
dia
n N
et
IRR
sin
ce
In
ce
ptio
n
Vintage Year
Median Net IRRs by Vintage Year: Private Equity Secondaries vs. All Private Equity
Private Equity Secondaries All Private Equity
22
Investors Seek Exposure to Private Equity for Diversification & High Absolute Returns
0%
10%
20%
30%
40%
50%
60%
70%
80%Diversification
High Risk-AdjustedReturns
High Absolute Returns
Low Correlation to OtherAsset Classes
Inflation Hedge
Reliable Income Stream
Reduce Portfolio Volatility
Private Equity Private Debt Hedge Funds
Real Estate Infrastructure Natural Resources
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0% 5% 10% 15% 20%
Ris
k -
Sta
ndard
Devia
tion N
et IR
R
Return - Median Net IRR
Private Capital: Risk/Return by Asset Class (Vintages 2008-2017)*
Infrastructure Natural Resources Private Debt Private Equity Real Estate
23
Median Net IRRs by Fund Type
0%
5%
10%
15%
20%
25%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Me
dia
n N
et
IRR
sin
ce
In
ce
ptio
n
Vintage Year
Private Equity: Median Net IRRs by Fund Type and Vintage Year
Buyout Venture Capital Growth Fund of Funds Secondaries
Source: Preqin Pro. Most Up-to-Date Data
24
Investors Remain Confident & Optimistic
37% 34%
48% 51%46%
52%48%
51%53%
42% 34%34%
39%
35%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Private Equity Venture Capital Private Debt Hedge Funds Real Estate Infrastructure Natural Resources
Pro
po
rtio
n o
f R
esp
on
de
nts
Investor Expectation for Alternative Assets Performance in the Next 12 Months Compared to the Previous 12 Months
Will Perform About the Same Will Perform Better Will Perform Worse
Source: Preqin Investor Survey, November 2020
25
Planning to Commit More Capital to Private Equity
44%36%
47%
26%36%
54%
31%
46%
50%40%
47%
45%
38%
45%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Private Equity Venture Capital Private Debt Hedge Funds Real Estate Infrastructure Natural Resources
Pro
po
rtio
n o
f R
esp
on
de
nts
Investors' Expected Capital Commitments to Alternative Assets in the Next 12 Months Compared to the Previous 12 Months
More Capital Same Amount of Capital Less Capital
Source: Preqin Investor Survey, November 2020
26
More Investors are Targeting Direct Investments & Co-investment Opportunities
0%
10%
20%
30%
40%
50%
60%
70%
80%
Pooled Single-Manager Funds Co-Investments Pooled Funds of Funds Direct Investments Separate Accounts Open-Ended*
Pro
po
rtio
n o
f R
esp
on
de
nts
Private Equity Fund Structures Targeted by Investors in the Next 12 Months, 2018 - 2020
Nov-18 Nov-19 Nov-20
Source: Preqin Investor Surveys, November 2018 - 2020
27
Buyout, Growth & Secondaries Seen as Opportunities
0% 10% 20% 30% 40% 50% 60% 70%
Venture Capital – Venture Debt
Venture Capital – Seed
Venture Capital – Late Stage
Fund of Funds
Venture Capital – Early Stage
Buyout – Large to Mega
Venture Capital – General
Secondaries
Growth
Buyout – Small to Mid-Market
Proportion of Respondents
Investor Views on the Fund Types Presenting the Best Opportunities in Private Equity, 2018 - 2020
Nov-18 Nov-19 Nov-20
Source: Preqin Investor Surveys, November 2018 - 2020
28
The Future of Alternatives
29
Projecting AUM of $17tn as of 2025
11.8
13.0
14.2
15.6
17.2
0
2
4
6
8
10
12
14
16
18
20
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Asse
ts u
nd
er
Ma
na
ge
me
nt
($tn
)
Alternative Assets under Management and Forecast,2010 - 2025*
30
Private Equity AUM to Reach $9bn
5,107
5,902
6,822
7,885
9,114
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Asse
ts u
nd
er
Ma
na
ge
me
nt
($b
n)
Private Equity Assets under Management and Forecast, 2010 - 2025*
31
Overwhelming Majority of Investors Plan to Increase Exposure to Alternatives
23%16%
8% 10%15%
6%
56%
51%
27%
41%
51%
29%
17%
25%
34%
33%
24%
38%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Private Equity Private Debt Hedge Funds Real Estate Infrastructure Natural Resources
Pro
po
rtio
n o
f R
esp
on
de
nts
th
at In
ve
st in
th
e A
sse
t C
lass
Investors' Plans for Their Allocation to Alternatives by 2025 by Asset Class
Will Increase Significantly Will Increase Will Stay the Same Will Decrease Will Decrease Significantly
Source: Preqin Investor Survey, August 2020
32
Private Equity Outperforms Over the Longer Term
PrEQIn Quarterly Index vs. Public Markets
33
The Continued Rise of ESG
8%
29%
28%
20%
13%
3%
Investor Views on the Importance of ESG in Investment Decisions
Extremely Important
Considerably Important
Moderately Important
Average Importance
Low Importance
No Importance
43%
36%
20%
1%1%
Investor Views on the Change in Interest in/Demand for Their Organizations' ESG Capabilities or Strategies over the Past 12 Months
Significant Increase
Modest Increase
No Change
Modest Decrease
Significant Decrease
34
Investor Demand and Industry Standards Driving ESG Demands
78%
67%
36%31%
27% 26%
14%
25% 26%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Investo
r D
em
and
Industr
y S
tandard
s/B
est P
ractices
Investm
ent R
isk
Fid
ucia
ry R
esponsib
ility
Mo
ral Im
pera
tive
Regula
tory
Dem
ands
Outp
erf
orm
ance
Com
pe
tition
with F
un
d M
an
ag
ers
Polit
ical P
ressure
Pro
port
ion o
f R
espondents
Investor Views on Why Fund Managers Establish an ESG Policy
30%
42%
32%
45%
17%
40%
31%
40%
37% 38%
34%
42%
0%
25%
50%
Enhanced R
isk
Ma
nagem
ent
Dem
and fro
m L
Ps
Pote
ntial fo
r V
alu
eC
reation
Eth
ical
Consid
era
tions
Regula
tion
Best
Pra
ctice/C
om
pe
titiv
e A
dvanta
ge
Pro
port
ion o
f R
espondents
Fund Manager Views on What Is Driving the Adoption of ESG Monitoring and Reporting, 2020 vs. 2025
2020 2025
35
Average Size of ESG-Focused Funds Increasing
99104
10197
83 82
0
20
40
60
80
100
120
0
200
400
600
800
1,000
1,200
1,400
2015 2016 2017 2018 2019 2020
No.
of F
unds
Avera
ge F
und S
ize ($
mn)
Vintage Year
Average Size of Private Capital Funds with an ESG Policy in Place by Vintage Year
No. of Funds Average Fund Size ($mn)
36
Summary
• AUM has continued to increase despite the turmoil and uncertainty that we experienced in 2020
• Private Capital AUM stands at $8tn+ as of September 2020
• Future AUM growth is to be driven by Private Equity and Private Debt
• Projecting upwards of $17tn in 2025
• Investors remain confident and committed to Alternatives over the longer term
• Asia growing in terms of opportunities and AUM market share
• ESG continues to be an important factor in capital allocation – investor demand and need for a
competitive advantage
37
Further Information….
Joseph Borda, CAIA
Senior VP, Research & Data Operations
