2022 preqin global private equity venture capital report 2022 preqin global private equity venture capital report

(As of 7/10/2021). On some diversity metrics, private markets firms compare favorably with corporate America, although ethnic diversity is not yet broad based. 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. 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). Real estate (23 percent) and private equity (15 percent) declined most precipitously from 2021s record highs, while private credit (+2 percent) proved more resilient. Going forward, shifting macroeconomic conditions will make efficiency initiatives an increasingly important value driver in Asian private equity. 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. Quantitative tightening and dislocation in asset prices raised fears of an economic slowdown. Buyout deal value and exits set all-time records for the industry. Leapfrog tech potentially has the ability to further accelerate growth, thereby offering the opportunity for outsized returns. 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. Venture capital is gearing up for a cold spell as portfolio companies' growth and fundraising are slowing. Planning to Commit More Capital to Private Equity Investors' Expected Capital Commitments to Alternative Assets in the Next 12 Months Compared to the Previous 12 Months 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Private EquityVenture Capital Private Debt Hedge Funds More Capital Same Amount of Capital Real EstateInfrastructure Less Capital 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. . Global Private Equity Report Outside the EU, MSIM materials are issued by Morgan Stanley Investment Management Limited (MSIM Ltd) is authorised and regulated by the Financial Conduct Authority. Infrastructure and natural resources grow and evolve, Private markets advance their ESG agendas. 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. 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. Private markets deal volume plummeted, performance declined, and valuations felldramatically in certain sectors. As overall GDP growth slows, efficiency improvement will become increasingly more important. 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. TECH AS A LEAPFROG OPPORTUNITY 2022 Preqin Global Venture Capital Report | Preqin The market environment in the next few years will present further dislocation and opportunity for fundamental value creation. 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. Valuation multiples have been falling across both public and private markets, with venture capital positions arguably the most . equity, real assets, and debt capital markets. Interest rates stayed low, credit availability was high, and valuations rose consistently. Das Naes Unidas 14401, Torre Hotel Chcara Santo Antnio So Paulo, BR-SP. Italy: MSIM FMIL (Milan Branch), (Sede Secondaria di Milano) Palazzo Serbelloni Corso Venezia, 16 20121 Milano, Italy. Eine monatliche Publikation mit den neuesten Einblicken des Global Multi-Asset Teams zum Wirtschafts- und Marktumfeld und zur optimalen Portfoliopositionierung. Investing in Asian private equity comes with a unique set of challenges and risks beyond what this paper has explored. Its 2022, and were coming off an extremely busy year in private equity. By contrast, Asia-Pacific (APAC) respondents maintain the most cautious view. 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. Total private markets assets under management (AUM) reached $11.7 trillion as of June 30, 2022. document.write(new Date().getFullYear()); MorganStanley.Alle Rechte vorbehalten. [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). Real estate deal volume declined 20 percent to $1.1 trillion, also the second-highest year on record. The article was edited by Arshiya Khullar, an editor in the Gurugram office. 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. More than half of respondents (58%) highlighted it as the top risk factor to their portfolio. This is prepared for sophisticated investors who are capable of understanding the risks associated with the investments described herein and may not be appropriate for the recipient. Vintage years beyond 2017 have been excluded as performance is less mature and may be too early to tell. 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. This publication, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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. 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. S&P Global. The flow of capital into the asset class has pushed investors to look beyond traditional core infrastructure assets (Exhibit 10). Across all regions, digitalization is high up on PE agendas and awareness has risen significantly. 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. How market turmoil is filtering the waters of private real estate 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. PE returns disappointed, recording the worst year (through September 30) since 2008, and PE ended a five-year run as the top-performing asset class. 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. Andrew Slimmon, Lead Portfolio Manager der Fonds und Strategien des Applied Equity Advisors Teams, teilt seine Einschtzung der Finanzmrkte. According to our latest Global Private Markets Review, private markets faced a year of two halves in 2022, with buoyancy in the first half and plummeting deal volumes, declining performance, and falling valuations in the second. The third risk factor concerning PE/VC firms this year has changed considerably from last year. 2022 Preqin Global Private Equity Report. Private markets fundraising fell 11 percent to $1.2 trillion, as the denominator effect affected some LPs ability to allocate capital. 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. 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. Although PE firms have been slow to join the digital technology revolution, many are catching up and implementing advanced data and analytics tools to identify new growth opportunities and remain competitive. In the EU, MSIM and Eaton Vance materials are issued by MSIM Fund Management (Ireland) Limited (FMIL). [12] Robust private equity exits may set record year. 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). As institutional capital gravitates toward massive generalist private market managers with well-established . Tighter financial conditions and general risk aversion continued to slow activity across the venture capital industry in the fourth quarter of 2022. 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). Persons considering an alternative investment should refer to the specific investments offering documentation, which will fully describe the specific risks and considerations associated with such investment. 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. AUM has now grown at an annual rate of nearly 20 percent since 2017. 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). At $2.5 Bn, MSIM Raises One of the Largest Funds Focused on Single Asset GP-Led Continuation Vehicles. The Market Monitor series includes a wide array of market charts and views to guide your investing discussions. The table below indicates the fund types Preqin considers as constituting each asset class. 8 Source: Bloomberg, data as of February 28, 2023. 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. Amid current financial market volatility, investors are revisiting asset allocations in their portfolios, hoping to identify attractive market segments with upside potential. In our podcast series, Bain's Hugh MacArthur interviews leading experts on the trends and opportunities that will redefine the private equity industry. 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. The prevailing market uncertainty also served as a shot in the arm for private credit deployment opportunities. Private equity surged ahead with soaring deal and exit values. 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. Notwithstanding these risks, a variety of factorsaccelerated growth/leapfrog potential in underpenetrated industries, opaque and attractive valuations relative to developed markets, and overlooked opportunities for improvements in operational efficiencycontribute to the regions potential for outperformance. 2022 will prove to be the best year yet for ESG-focused fundraising, with $24 billion raised through the first half of the year. Private markets have enjoyed strong tailwinds since the depths of the Global Financial Crisis (GFC). /marketintelligence/en/news-insights/research/2022-global-private-equity-outlook Dry powder inventorythe amount of capital available to GPs expressed as a multiple of annual deploymentspiked. 2022 Global Private Equity Outlook | S&P Global Market Intelligence The Covid-19 pandemic re-emphasized the importance of localized operations, as closed borders made it impossible for non-local managers to undertake transactions. Survey of private equity (PE) and venture capital (VC) firms 2022 On the surface, historical private equity (PE) performance in Asia has been shown to be on par with performance numbers generated in other regions. 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. Banks began to pull back, unwilling or unable to lend. 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. 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 . This progress is a result of many factors. 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. Global alternatives AUM forecast to double by 2026, topping $23 While the long-term demand for capital is tremendous, with a projected global infrastructure spending gap of $15 trillion through 2030,2McKinsey. Performance also declined from 2021s high as lower marks offset current yield gains. Asian Private Equity: Wheres the Risk Premium? Number Of France-Based Institutions Investing In Private Equity Grows Indeed, real estate performance has exceeded inflation in six of the last seven inflationary periods, in part due to cap rate compression even during a rising interest rate environment. 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. 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. 12 Weforum.org How reform has made Chinas state-owned enterprises stronger October 2020. /pub/content/dam/im/json/imwebdata/im/data/misc/translation/translation.json, /pub/content/dam/im/json/imwebdata/im/data/misc/translation/aggTranslation.json. Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. Registered in England. And while infrastructure and NR fund performance declined somewhat from 2021, these funds were the top-performing private markets asset classes in 2022. 11 Bain & Company, "Asia-Pacific Private Equity Report 2022". 48% of respondents were senior level professionals. Yet, like most private market segments, real estate experienced a downturn in 2022 compared with the record year it followed. Outside the US and EU, Eaton Vance materials are issued by Eaton Vance Management (International) Limited ("EVMI") 125 Old Broad Street, London, EC2N 1AR, UK, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority. First-time fund launches also decreased by 40 percent. Beyond robust GDP growth, under-penetration in many sectors creates opportunity for accelerated growth. 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. The contents of this material have not been reviewed nor approved by any regulatory authority including the Securities and Futures Commission in Hong Kong. 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. 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. 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. Please consider the investment objectives and nature of risks before investing. 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%). In 2022, mezzanine strategies were most in favor, posting record fundraising totals and more than tripling 2021s haul. 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. [2] Private equity managers expect another boom year in 2022. A strengthening dollar accounted for a material portion of the dollar-based decline in fundraising in non-US markets. 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%). The adoption of technology within China over the past two decades is a good example. 6 Source: PPRO Asia Pacific, Western and Central Europe, North America Payments and e-commerce report 2022. As the industry narrative turned from beta to alpha, there was less alpha to be had in 2022. 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. 13 Russell Reynolds, Transitioning to the Next Generation: Leadership succession within family businesses in Southeast Asia, November 2021. 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. Alternative investments typically have higher fees and expenses than other investment vehicles, and such fees and expenses will lower returns achieved by investors. 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. But whether the exit activity will be on par with that of 2021 remains to be seen, and may hinge on looming economic risks. Disallowed Products Our Products Preqin Pro Alternative assets data platform Insights+ 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. Fundraising results differed notably across geographies, more so than in previous years. After more than a decade of rapid fundraising growth, strong macroeconomic headwinds slowedbut did not stopprivate debts growth. FMIL is regulated by the Central Bank of Ireland and is incorporated in Ireland as a private company limited by shares with company registration number 616661 and has its registered address at The Observatory, 7-11 Sir John Rogersons Quay, Dublin 2, D02 VC42, Ireland. Across our clients, we see ESG becoming a competitive differentiator and driver of returns. [1] The survey was conducted over the period of 15 weeks between October 4, 2021, and January 16, 2022. (As of 13/01/2022). Accordingly, save where an exemption is available under the relevant law, this material shall not be issued, circulated, distributed, directed at, or made available to, the public in Hong Kong. Open-end funds in the US grew NAV by 24 percent, with contributions exceeding distributions for the first time in two years. Together, we achieve extraordinary outcomes. Private debt fundraising continued to grow last year (+2 percent), once again bucking the trend of other private asset classes. 2 Preqin, data as of September 2022. The client shall delegate to MSIMJ the authorities necessary for making investment. 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. Most of the current fund commitment decisions were made last year, which was impacted by the denominator effect as public markets . 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. 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. On the supply side, the closing of a record number of global megafunds boosted fundraising. Ethnic, racial, and gender representation also remains imbalanced in senior positions and investing roles, suggesting that firms broadly continue to miss talent opportunities. Anne Philpott, Churchill Asset Management Private equity's global dry powder, or uninvested capital, stood at a record $1.3 trillion as of September 2021, according to Preqin. Contenders for the third sector of choice are the Consumer (35%) and Industrials (34%) sectors. The largest five managers accounted for 29 percent of all fundraising, the highest share of the last decade, and tenants favored class A real estate as they fought to attract and retain employees. This year we also included a question on investors advances on their digitization and automation journey. 18% of APAC investors say that LPs demanding diversification and fierce competition against larger firms pose other significant fundraising challenges. 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. Yet, high-quality assets in segments where there is perceived scarcity value can often achieve premium valuations at exit. More private markets managers are incorporating considerations for ESG factors into their corporate policies, operating procedures, and investment decisions. 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. The pattern in 2021 and 2022 was no different: despite rising US Treasury (UST) rates, cap rates decreased and values rose. of the securities, and MSIMJ accepts such commission. 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. 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. MSIM's affiliates are: Eaton Vance Management (International) Limited, Eaton Vance Advisers International Ltd, Calvert Research and Management, Eaton Vance Management, Parametric Portfolio Associates LLC, and Atlanta Capital Management LLC. Digital innovation and transformation across existing workflows are imperative for PE firms wishing to maintain a competitive edge among peers.