Digital innovation and transformation across existing workflows are imperative for PE firms wishing to maintain a competitive edge among peers. 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. Andrew Slimmon, Lead Portfolio Manager der Fonds und Strategien des Applied Equity Advisors Teams, teilt seine Einschtzung der Finanzmrkte. Private Equity & Venture Capital Net IRR from 2002-2017 by Primary Geographic Exposure Source: Preqin Pro as of September 30, 2022 . Expanding capitalization (cap) rates across sectors, which represent the multiple investors are willing to pay for net operating income (NOI), drove performance lower. 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. 2 Preqin, data as of September 2022. Counterintuitively, manager selection mattered less in 2022 than in years past: the interquartile spread of returns of PE funds narrowed in 2022 to 21.6 percent from the prior ten-year average of 33.8 percent. Its 2022, and were coming off an extremely busy year in private equity. This trajectory led to faster adoption; based on data from 1997-2015, unicorn status Chinese Internet startups took an average of four years to reach their $1 billion valuationversus seven years for their U.S. counterparts. Finally, amid the broader slowdown in technology-oriented PE deal making, investments in property technology companies fell to the lowest total in five years. Markets climbed higher still, awash with central-bank-induced liquidity. It's our market overview from Bain & Company's 2022 Global Private Equity Report. Across all regions, digitalization is high up on PE agendas and awareness has risen significantly. Environmental issues and regulations, lack of financing and raw materials, logistics and high valuations are other topics of concern on investors minds. The mood changed in early summer. Principles for Responsible Investment, annual report, 2022. Stay on top of today's volatile markets with these timely resources. Conversely, dollars raised by sub$5 billion funds decreased by 28 percent. Unsurprisingly, growth is a leading factor that makes Asia an appealing target for private investment capital. 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. Unser aktueller Artikel aus der Reihe Tales from the Emerging World gewhrt Einblicke in neue Trends in den Schwellenlndern. [8] Multiple selections were allowed. For more from Dry Powder on the report, you can listen to Three Essential Trends . [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. Labor shortages in the wake of the pandemic are undoubtedly playing a role in the overall picture. Second, LPs are increasingly incorporating ESG metrics into their capital allocation processes. Banks began to pull back, unwilling or unable to lend. 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. Key Takeaways Just 2,141 funds were closed during the year, 1,600 fewer than in 2021 and the fewest of any year since 2013. Performance also declined from 2021s high as lower marks offset current yield gains. (As of 13/01/2022). 8 Source: Bloomberg, data as of February 28, 2023. 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. Its our market overview from Bain & Companys 2022 Global Private Equity Report. (As of 16/11/2021). (As of 31/01/2022). current macroeconomic and geopolitical events are creating short-term pressure on high-growth sectors such as telecommunications and renewables. Automating these manual, inefficient processes are potential easy-wins to improve efficiency. No investment should be made without proper consideration of the risks and advice from your tax, accounting, legal or other advisors as you deem appropriate. 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]. While the industry continues to digitize rapidly, companies leading that effort found fundraising more difficult than in years past. Since these charges and expenses are different depending on a contract and other factors, MSIMJ cannot present the rates, upper limits, etc. 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. New platforms comprised 28 percent of total transactions in 2022, 14 percentage points lower than five years ago. 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. The decline was most evident in Europe and Asia, while fundraising in North America increased slightly (Exhibit 1). SPACs are playing a new role in the market dynamics, particularly in the U.S. The adoption of technology within China over the past two decades is a good example. And while infrastructure and NR fund performance declined somewhat from 2021, these funds were the top-performing private markets asset classes in 2022. Like PE deal making, first-half real estate deal making continued close to the record-setting pace of the second half of 2021, but second-half volumes declined precipitously. 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. Exit volume fell sharply, as sponsors chose to hold assets rather than sell into a declining-valuation environment. LatAm investors especially seem to have accelerated the adoption of ESG principles: the number seeking investments in companies with a good ESG track record has nearly doubled from last year, to 43% from 25%, while the number of firms that are not considering ESG factors has decreased considerably, to only 7% from 19% in 2021. Catch new episodes by subscribing toDry PowderonApple Podcasts,Google Podcasts,Spotifyor wherever you may listen. 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. Private equity funds continued to deliver returns outpacing any other asset class. www.capitaliq.spglobal.com, [5] Investing in the next generation of healthcare opportunities. McKinseys Private Markets Annual Review: 2017 to 2022. Bain's Global Private Equity Report examines the industrys strengths, its challenges, and the evolutionary path that lies ahead. By contrast, Asia-Pacific (APAC) respondents maintain the most cautious view. Amid current financial market volatility, investors are revisiting asset allocations in their portfolios, hoping to identify attractive market segments with upside potential. 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. North America largely led this increase, accounting for 76% of the total deal value. 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). While the long-term demand for capital is tremendous, with a projected global infrastructure spending gap of $15 trillion through 2030,2McKinsey. As bank financing dried up in the second half of the year, private lenders stepped into the void, providing financing for more than 80 percent of PE transactions in the middle market. ITS NOT JUST THE PRICE Example: 70% of all Europe-based investors responded that they are planning of making investments in Software & Services. 1981121. 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. Because of the deterioration in technology valuations, VC and growth equity returns led the fall, in stark contrast to the last several years. 6 Source: PPRO Asia Pacific, Western and Central Europe, North America Payments and e-commerce report 2022. Beyond China (which is currently facing its own challenges), leapfrog potential exists in other parts of Asia. in advance. 20% of all survey participants think that large LPs pouring capital into fewer funds with established LP-GP relationships is the second most common challenge, a sentiment felt most by European investors (23%). In our podcast series, Bain's Hugh MacArthur interviews leading experts on the trends and opportunities that will redefine the private equity industry. 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%). 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. Companies with cutting-edge tech and design can be positioned for Asia and/or global expansion and sold at a premium valuation. 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. [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. 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. 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. In a break from years past, PE performed worse than other private asset classes, producing negative returns (through September 30, 2022) for the first time since 2008. 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. 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). 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.