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. 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. TECH AS A LEAPFROG OPPORTUNITY Morgan Stanley Investment Managements 1GT Co-Leads $50 Million Funding for Everstream Analytics. 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. This year we also included a question on investors advances on their digitization and automation journey. In the first half of 2022, central banks fought roaring inflation by sharply raising interest rates, and public market valuations cratered. When it comes to the fundraising outlook, half of the respondents expect fundraising conditions to remain the same and another 36% believe it will improve; among Middle East and Africa investors the percentage is as high as 52%, which indicates a very positive outlook for 2022. Spain: MSIM FMIL (Madrid Branch), Calle Serrano 55, 28006, Madrid, Spain. Since 2017, fundraising in Asia has declined 16 percent per year, driven primarily by reduced investment in China. 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. Under-penetration of financial services and modern retail presented an opportunity for China to develop more advanced solutions than what existed in the West. 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. Markets climbed higher still, awash with central-bank-induced liquidity. VC and growth equity both had their second-largest fundraising year on record, cumulatively accounting for more than 50 percent of PE fundraising for the first time. 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. [1] The survey was conducted over the period of 15 weeks between October 4, 2021, and January 16, 2022. 18% of APAC investors say that LPs demanding diversification and fierce competition against larger firms pose other significant fundraising challenges. 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. There are also pockets where capital supply/demand dynamics remain reasonable, resulting in attractive entry valuationse.g., in Thailand, there is a paucity of PE managers facilitating investment opportunities in high quality, growing companies. One recent survey indicates that nearly three-quarters of LPs would consider eliminating a manager from consideration if it was unable to provide acceptable standards of ESG-related disclosures.7Global Private Equity Barometer, Coller Capital, Winter 202223. The diversity of strategies within private debt also helps explain its consistent growth. Going forward, shifting macroeconomic conditions will make efficiency initiatives an increasingly important value driver in Asian private equity. 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). 2022 will prove to be the best year yet for ESG-focused fundraising, with $24 billion raised through the first half of the year. 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. However, cap rates started expanding toward the end of 2022, signaling heightened uncertainty across real estate markets. A strengthening dollar accounted for a material portion of the dollar-based decline in fundraising in non-US markets. This material has been issued by any one or more of the following entities: EMEA: This material is for Professional Clients/Accredited Investors only. 48% of respondents were senior level professionals. Source: Preqin Pro as of September 30, 2022, COPYCAT MODELS ACCELERATING GROWTH Leapfrog tech potentially has the ability to further accelerate growth, thereby offering the opportunity for outsized returns. Retrieved from: https://www.capitaliq.spglobal.com/web/client?auth=inherit#news/article?id=66494139. Gbenga Oladeji oversees Global Private Markets for Johnson & Johnson Benefits Investment team. On the heels of a banner 2021, which set records for fundraising and deal making and produced exceptionally strong returns, PE fell back to earth in 2022. Both sectors attractiveness has increased from last year (30% and 26% respectively). A Private Equity Lens on the Energy Transition The global shift away from carbon-based fuels is gaining momentum. 13 Russell Reynolds, Transitioning to the Next Generation: Leadership succession within family businesses in Southeast Asia, November 2021. 2021 was a record year for the PE industry as investment activity surpassed the trillion-dollar mark for the first time. Among this cohort, 46% of Chinese unicorns reached that status within two yearsversus only 9% of U.S. unicorns, suggesting this hyper-accelerated growth as the norm rather than the exception among successful Chinese startups.4. 2022 Preqin Global Private Equity Report | Preqin This progress is a result of many factors. A pre-investment ESG diligence includes a materiality scan, ESG performance and benchmark, value-at-stake analytics, and an ESG maturity assessment. Die auf dieser Website beschriebenen Dienstleistungen sind unter Umstnden nicht in allen Rechtsgebieten oder fr alle Kunden verfgbar. In total, 2,543 funds held a final close, a 14% increase on the previous years tally. 8 Source: Bloomberg, data as of February 28, 2023. 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. [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. Today on Dry Powder, well cover the essential indicators of 2021, which can inform your strategy in 2022 and beyond. Global Private Equity Report Web3 Remains Highly Relevant for Private Equity Despite the hype and turmoil in the crypto world, web3 technology is here to stay. Add-on deals, which tend to be smaller, continued to gain share as a percentage of total deals. Conversely, dollars raised by sub$5 billion funds decreased by 28 percent. Similarly, Australian software companies can be invested in at modest high single-digit/low double-digit EV/ EBITDAs and sold on to global strategics at premium double-digit EV/EBITDAs. 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. Following the record highs achieved in 2021, which were buoyed by pent-up demand from the earlier stages of the pandemic, several exogenous macroeconomic events stymied growth. 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. Like the strategies for other asset classes, infrastructure and NR strategies were affected by macroeconomic challenges. France: MSIM FMIL (Paris Branch), 61 rue de Monceau 75008 Paris, France. January 31st, 2023. First-time fund launches also decreased by 40 percent. Office, retail, and hospitalitythe sectors most affected by pandemic-driven changes in working, shopping, and travelingshowed signs of emerging stability. Vintage years beyond 2017 have been excluded as performance is less mature and may be too early to tell. This is up from 51% in 2021, indicating that its attractiveness continues to grow year-on-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). More than three-quarters of firms (77%) say they are planning to exit their portfolio companies, marking an increase from last year (66%). Many attributes of businesses located in Asia are well-suited to operational improvements that can both further growth and increase margins. 37 How are increasing LP sophistication and diversification shaping the industry and the types of services GPs need to offer? Its our market overview from Bain & Companys 2022 Global Private Equity Report. Private equity funds continued to deliver returns outpacing any other asset class. For more from Dry Powder on the report, you can listen to Three Essential Trends. 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. IT and Healthcare sectors will continue to be in high demand, with ESG considerations taking an increasingly central role in the investment decision process and beyond. 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. 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. Macroeconomic headwinds, including rising inflation and interest rates, coupled with negative public market performance (17.7 percent) triggered the aforementioned denominator effect, and LPs scaled down new commitments. 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. This publication has not been reviewed by the Monetary Authority of Singapore. 22% of respondents say their firms are exploring digital technologies while 7% say their firms are close to making the final decision. 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. As an investment advisory fee for an IAA or an IMA, the amount of assets subject to the contract multiplied by a certain rate (the upper limit is 2.16% per annum (including tax)) shall be incurred in proportion to the contract period. 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. 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. Infrastructure and natural resources (NR) overcame broader market headwinds in 2022 to set a new fundraising record of $158 billion (Exhibit 9). In almost every regard, 2021 was an exceptional year (as we highlightedin last years report) but it was not a trend breaker. 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. In the context of elevated investment levels, this likely suggests that investors are growing wary of risks such as inflation, rising interest rates and high valuations that could put the brakes on this unprecedented pace of transactions.[2]. We asked the CEO of Moonfare what it takes to get ordinary investors up to speed and investing in private equity with confidence. 314182, which accept responsibility for its contents. 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. Sponsored by. McKinsey research to be published. The 2022 Global Private Equity Report: Market Overview 00:00 08:58 Today on Dry Powder, we'll cover the essential indicators of 2021, which can inform your strategy in 2022 and beyond. 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). Source: S&P Capital IQ as of 28 February 2023. 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. Please select an industry from the dropdown list. 1981121. /marketintelligence/en/news-insights/research/2022-global-private-equity-outlook The table below indicates the fund types Preqin considers as constituting each asset class. (As of 20/01/2022). 4 Source: BCG, Decoding the Chinese Internet Sept 2017 EY. 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. 2022 is likely to be an active year for private equity exits, and many investors are preparing to divest their portfolio companies. In total we received 357 responses from PE and VC investors globally. Closed-end fundraising declined 23 percent year over year. However, in 2021, the Consumer sector saw the sharpest rise in deal value of all sectors, tripling $180.8billion in 2021 from $63.3billion in 2020 to[7]. 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. In a year when other private classes fell back to earth somewhat, private debt set a new fundraising record, led by several megafund closes. By just about any measure, private equity set a remarkable new standard in 2021. Labor shortages in the wake of the pandemic are undoubtedly playing a role in the overall picture. According to both Preqin 2 and Infrastructure Investor 3, the private infrastructure sector raised less than USD 10 billion in the first quarter of 2023, making it the weakest fundraising quarter in almost 10 years.
Federal and state tax laws are complex and constantly changing. 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. 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. Exits in the region are notoriously complicated, as tighter public markets limit IPO options and geopolitical uncertainty clouds valuations. Compared with a heady prior decade of robust growth, 2022 was a subdued year in the private markets. The report finds that despite solid foundations, last year was slow for both fundraising and investments, while performance held up better than the global . [5]In 2021, deal activity in Healthcare continued gaining momentum, not only in terms of deal count but also deal value, which reached $340 billion; Healthcare Technology deal counts contributed the most to the sectors dynamism.[6]. As institutional capital gravitates toward massive generalist private market managers with well-established . For more from Dry Powder on the report, you can listen to Three Essential Trends . The client shall delegate to MSIMJ the authorities necessary for making investment. *I have read thePrivacy Policyand agree to its terms. [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). 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. 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. Political upheaval (26 %) and the high speed of technological changes (20%) round off the top five risk factors. The mood changed in early summer. 2022 Preqin Global Private Equity Report. How market turmoil is filtering the waters of private real estate In Switzerland, MSIM materials are issued by Morgan Stanley & Co. International plc, London (Zurich Branch) Authorised and regulated by the Eidgenssische Finanzmarktaufsicht (FINMA). Review sample excerpts of data and insights from our 2022 Global Alternatives Reports when you download the free Alternatives in 2022 report today.. 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. North America largely led this increase, accounting for 76% of the total deal value. 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. 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. All clients should read the Documents Provided Prior to the Conclusion of a Contract carefully before executing an agreement. For illustrative purposes only.[8]. For the fifth consecutive year, S&P Global Market Intelligence conducted an annual survey among PE and VC practitioners to measure industry outlooks for the upcoming 12 months. 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. [12] Robust private equity exits may set record year. 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. Global Private Equity Report Bookmark content that interests you and it will be saved here for you to read or share later. 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. 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.
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