Insights Blog: Five Findings from COP27 with Vikram Raju. On the supply side, the closing of a record number of global megafunds boosted fundraising. The article was edited by Arshiya Khullar, an editor in the Gurugram office. 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. January 31st, 2023. The Covid-19 pandemic re-emphasized the importance of localized operations, as closed borders made it impossible for non-local managers to undertake transactions. Morgan Stanley Investment Managements 1GT Co-Leads $50 Million Funding for Everstream Analytics. 7 An efficient market is one where the market price is an unbiased estimate of the true value of an investment. This progress is a result of many factors. 18% of APAC investors say that LPs demanding diversification and fierce competition against larger firms pose other significant fundraising challenges. Note: Credit Card Penetration as defined by percentage of people age 15+ who use credit cards Source: Statista, data as of June 2022, Source: PPRO Asia Pacific, Western and Central Europe, North America Payments and e-commerce report 2022. 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. Venture capital is gearing up for a cold spell as portfolio companies' growth and fundraising are slowing. By just about any measure, private equity set a remarkable new standard in 2021. 2022 is likely to be an active year for private equity exits, and many investors are preparing to divest their portfolio companies. Beyond robust GDP growth, under-penetration in many sectors creates opportunity for accelerated growth. McKinsey research to be published. 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. S&P Global Market Intelligence Retrieved from: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/private-equity-managers-expect-another-boom-year-in-2022-68394243, [3] Preqin Pro, (as of 07/02/2022). 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. Second, LPs are increasingly incorporating ESG metrics into their capital allocation processes. Beneath these headline statistics, revolutions in energy, mobility, and digitization are changing the face of infrastructure investing. Finally, amid the broader slowdown in technology-oriented PE deal making, investments in property technology companies fell to the lowest total in five years. Another prevailing theme for the upcoming months to grow in significance will be digitalization. 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. 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. Stay ahead in a rapidly changing world. Funds over $5 billion collected a record $445 billion in aggregate, a 51 percent increase over funds of a similar size in 2021. It's our market overview from Bain & Company's 2022 Global Private Equity Report. [1] The survey was conducted over the period of 15 weeks between October 4, 2021, and January 16, 2022. The table below indicates the fund types Preqin considers as constituting each asset class. 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. 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 Increasing representation across all levels will require managers to take fresh approaches to hiring, retention, and promotion. 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. The complexity and idiosyncrasies of Asian markets usually result in greater opacity to valuations. Globally, private equity generated $512 billion in buyout deal value during the first half of 2022, putting it on pace to produce the second-highest annual total ever (behind 2021's all-time record). Datenschutz Anecdotally, as little as five years ago, many businesses in the region managed trucking logistics via paper on a clipboard. A strengthening dollar accounted for a material portion of the dollar-based decline in fundraising in non-US markets. Office, retail, and hospitalitythe sectors most affected by pandemic-driven changes in working, shopping, and travelingshowed signs of emerging stability. www.capitaliq.spglobal.com, [5] Investing in the next generation of healthcare opportunities. EY. This year we also included a question on investors advances on their digitization and automation journey. MSIMJ exercises the delegated authorities based on investment decisions of MSIMJ, and the client shall not make individual instructions. The contents of this material have not been reviewed nor approved by any regulatory authority including the Securities and Futures Commission in Hong Kong. Italy: MSIM FMIL (Milan Branch), (Sede Secondaria di Milano) Palazzo Serbelloni Corso Venezia, 16 20121 Milano, Italy. The decline was most evident in Europe and Asia, while fundraising in North America increased slightly (Exhibit 1). 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. 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. 11 Bain & Company, "Asia-Pacific Private Equity Report 2022". 2022 will prove to be the best year yet for ESG-focused fundraising, with $24 billion raised through the first half of the year. S&P Global. Eine monatliche Publikation mit den neuesten Einblicken des Global Multi-Asset Teams zum Wirtschafts- und Marktumfeld und zur optimalen Portfoliopositionierung. 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. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements. 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. 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. On the surface, historical private equity (PE) performance in Asia has been shown to be on par with performance numbers generated in other regions. Ethnic, racial, and gender representation also remains imbalanced in senior positions and investing roles, suggesting that firms broadly continue to miss talent opportunities. Singapore: This material is disseminated by Morgan Stanley Investment Management Company and should not be considered to be the subject of an invitation for subscription or purchase, whether directly or indirectly, to the public or any member of the public in Singapore other than (i) to an institutional investor under section 304 of the Securities and Futures Act, Chapter 289 of Singapore ("SFA"); (ii) to a "relevant person" (which includes an accredited investor) pursuant to section 305 of the SFA, and such distribution is in accordance with the conditions specified in section 305 of the SFA; or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. 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. 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. 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. VC fundraising also saw an increased level of activity, with an aggregate capital raised up 23% on the previous year. . 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. 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. The definition of infrastructure and natural resources continues to expand, with todays funds now taking more equity risk than yesteryears did. 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). Both sectors attractiveness has increased from last year (30% and 26% respectively). 37% think it will remain the same, a slight increase over 2021 when only 27% of investors expected deal activity to remain flat. 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. Most of the current fund commitment decisions were made last year, which was impacted by the denominator effect as public markets . In 2017, for example, China represented 83 percent of fundraising in Asia, a share that dropped to 34 percent in 2022. content Exits in the region are notoriously complicated, as tighter public markets limit IPO options and geopolitical uncertainty clouds valuations. equity, real assets, and debt capital markets. 2022 Preqin Global Private Equity Report. This paper covers a few of the drivers of outperformance in Asiaaccelerated and leapfrog growth, valuation arbitrage and efficiency improvementand why these observed characteristics make the Asian market particularly attractive. Beyond China (which is currently facing its own challenges), leapfrog potential exists in other parts of Asia. This article is a summary of a larger report, available as a PDF, that is a collaborative effort by Pontus Averstad, Alejandro Beltrn, Marcel Brinkman, Paul Maia, Gary Pinshaw, David Quigley, Aditya Sanghvi, John Spivey, and Brian Vickery, representing views from McKinseys Private Equity & Principal Investors Practice. MSIM will look to address these risks/opportunities in future briefs. First-time fund launches also decreased by 40 percent. 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. For illustrative purposes only.[8]. Too many business leaders lack a clear understanding of profitability, but a few organizations are visualizing profits in startling detail. 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. Global private markets fundraising declined by 11 percent to $1.2 trillion. Signs of a flight to quality, or at least to better-known managers, emerged. High inflation persisted throughout most of 2022, prompting central banks around the world to increase interest rates at a historic pace. Subscribe to Bain Insights, our monthly look at the critical issues facing global businesses. 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. 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. Performance also declined from 2021s high as lower marks offset current yield gains. For those that can identify and partner with such private equity managers, there exists a promising opportunity for outperformance in the region. 12 Weforum.org How reform has made Chinas state-owned enterprises stronger October 2020. Stay on top of today's volatile markets with these timely resources. To date, top-line revenue growth has been the largest contributor to Asian PE returns.11 This is unsurprising, given that until recently growth has been easy to come by in Asian markets, making efficiency (and hence margin) improvement less of a focus. 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. Natural resources strategies, meanwhile, generated relatively strong performance for a second consecutive year, buoyed by elevated commodity prices. Dry powder inventorythe amount of capital available to GPs expressed as a multiple of annual deploymentspiked. 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%). In total, 2,543 funds held a final close, a 14% increase on the previous years tally. 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. Anne Philpott, Churchill Asset Management There was a notable drop in private debt deal volumes, driven by the slowdown in PE and only partially offset by market share gains taken from bank and syndicated financing channels (Exhibit 8). Private equity funds continued to deliver returns outpacing any other asset class. [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. Outside the EU, MSIM materials are issued by Morgan Stanley Investment Management Limited (MSIM Ltd) is authorised and regulated by the Financial Conduct Authority. 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. Finally, macroeconomic forces, including higher energy prices and geopolitical conflict, have strengthened long-term investor interest in alternative energy sources and overall energy independence. 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. 11 Bain & Company, Asia-Pacific Private Equity Report 2022. Indeed, LatAm grew by an outstanding 225%, to $19.5 billion in 2021 from almost $6 billion in 2020, with the top 12 deals accounting for a third of the total deal value in the region. Bain's Global Private Equity Report examines the industrys strengths, its challenges, and the evolutionary path that lies ahead. And the ongoing war and humanitarian crisis in Ukraine further exacerbated risks to the global economy, including higher commodity prices and disrupted supply chains. 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. Expanding capitalization (cap) rates across sectors, which represent the multiple investors are willing to pay for net operating income (NOI), drove performance lower. 3 Preqin, data as of July 2022. 2 Preqin, data as of September 2022. This has played out among Korean tech companies where early-stage investments are limited to local VCs, keeping valuations modest. For more from Dry Powder on the report, you can listen to Three Essential Trends. [11] S&P Capital IQ Pro Platform (as of 25/01/2022). As of the second quarter of 2022, dry powder exceeded $3 trillion, reflecting an 8.4 percent year-over-year increase and marking the eighth consecutive year of growth. Weitere Einzelheiten knnen aus unseren Nutzungsbedingungen entnommen werden. 10 Morgan Stanley Research, Investor Presentation India Banks, November 11, 2022. TECH AS A LEAPFROG OPPORTUNITY 1981121. This publication, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Netherlands: MSIM FMIL (Amsterdam Branch), Rembrandt Tower, 11th Floor Amstelplein 1 1096HA, Netherlands. By Cameron Joyce, CFA and Michael Patterson. Add-on deals, which tend to be smaller, continued to gain share as a percentage of total deals. According to Preqin data,[3]aggregate capitalraised by growth funds hit a new record of $136 billion, up by 60% on the previous year and exceeding the 5-year average of $114 billion. 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. In Asia overall, family businesses and small and medium enterprises make up 85- 90% of companies.13 Many of these businesses operate at low margins due to limited implementation of systems and technology. The client shall delegate to MSIMJ the authorities necessary for making investment. IPOs remain the first choice of exit methods among APAC investors (39%), and it is also increasingly attractive to LatAm investors, rising to 22% from only 4% last year. Globally, fundraising fell 15 percent from the all-time high achieved in 2021 (Exhibit 3). France-based fund managers are leaders in ESG investingLONDON, April 27, 2023 (GLOBE NEWSWIRE) -- Preqin, the global leader in alternative assets data, tools, and insights, published its Private Equity in France 2023: Preqin Territory Guide. SCARCITY VALUE DRIVES SIGNIFICANT EXIT PREMIUMS SPACs are playing a new role in the market dynamics, particularly in the U.S. Registered Office: 25 Cabot Square, Canary Wharf, London E14 4QA. 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. Ein monatlicher Ausblick fr die globalen Anleihemrkte einschlielich tiefgehender Analysen wichtiger Sektoren. 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. LPs concentrated commitments among large funds as many investors chose to re-up with known, tested names while forgoing commitments to smaller, newer managers. Conclusion More than three-quarters of firms (77%) say they are planning to exit their portfolio companies, marking an increase from last year (66%). 2022 will prove to be the best year yet for ESG-focused fundraising, with $24 billion raised through the first half of the year. 48% of respondents were senior level professionals. In the EU, MSIM and Eaton Vance materials are issued by MSIM Fund Management (Ireland) Limited (FMIL). Private markets fundraising fell 11 percent to $1.2 trillion, as the denominator effect affected some LPs ability to allocate capital. [12] Robust private equity exits may set record year. We work with ambitious leaders who want to define the future, not hide from it. Registered in England. The research defines outperformers as companies whose score on a series of assessed ESG metrics improved over time. Buyout deal value and exits set all-time records for the industry. Considerations for diversity, equity, and inclusion (DEI) have become an important part of the fundraising, hiring, and investing landscape in private markets. 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. This material is only intended for and will only be distributed to persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations. Under-penetration of financial services and modern retail presented an opportunity for China to develop more advanced solutions than what existed in the West. For some strategies, a contingency fee may be incurred in addition to the fee mentioned above. This has the knock-on effect of weakening fundraising, and we . On some diversity metrics, private markets firms compare favorably with corporate America, although ethnic diversity is not yet broad based. On aggregate those funds raised $845.5 billion capital across various strategies, with growth capital funds seeing the largest upsurge. FT Adviser. 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). Companies with cutting-edge tech and design can be positioned for Asia and/or global expansion and sold at a premium valuation. 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. After more than a decade of rapid fundraising growth, strong macroeconomic headwinds slowedbut did not stopprivate debts growth. In almost every regard, 2021 was an exceptional year (as we highlightedin last years report) but it was not a trend breaker. Many attributes of businesses located in Asia are well-suited to operational improvements that can both further growth and increase margins. MSIM, the asset management division of Morgan Stanley (NYSE: MS), and its affiliates have arrangements in place to market each others products and services. [4]The most favored industry group within the sector across regions, according to our respondents, is by far Software & Services (61%), while only 17% plan to invest in Hardware. Vintage years beyond 2017 have been excluded as performance is less mature and may be too early to tell. Private markets deal volume plummeted, performance declined, and valuations felldramatically in certain sectors. Indirect charges also may be incurred, such as brokerage commissions for incorporated securities. North America registered a 111% increase in aggregate deal value on the previous year and accounted for half of the total transaction value ($534 billion). 314182, which accept responsibility for its contents. In China, state-owned enterprises make up approximately 40% of GDP.12 These companies have traditionally been less nimble and commercially focused than their private counterparts, with many straightforward areas for operational improvement. 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. The pattern in 2021 and 2022 was no different: despite rising US Treasury (UST) rates, cap rates decreased and values rose. Certain information contained herein constitutes forward-looking statements, which can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "anticipate," "project," "estimate," "intend," continue" or "believe" or the negatives thereof or other variations thereon or other comparable terminology. 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%). Its 2022, and were coming off an extremely busy year in private equity. Beyond localized operations, the ability to adapt to unique customs can be both a hurdle and opportunity. Institutional investors sought out the asset class for various features that are attractive in times of market volatility: current yield, floating rates, and relative insulation (via its senior position in the capital stack) from declining valuations. New government policies that provide incentives for certain ESG investmentsmost notably the US Inflation Reduction Act of 2022are likely to strengthen this correlation further. 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. [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]. These disruptions had substantial and varied impacts on private markets fundraising, performance, and AUM growth, with steep declines in certain regions and strategies, and pockets of resilience in others. [14], Private Equity firms gradually catching the digitalization train. 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. In Indonesia, for example, stakeholders including entrepreneurs, venture capital (VC) funds and politicians, are working in concert to pre-empt potential fintech-related regulatory issues observed in the U.S. and China, such as crackdowns in the peer-to-peer lending space. Review sample excerpts of data and insights from our 2022 Global Alternatives Reports when you download the free Alternatives in 2022 report today.. Please select an industry from the dropdown list. This publication has not been reviewed by the Monetary Authority of Singapore. A defining characteristic of Asian markets is the way geopolitical and cultural factors inform how business is done. document.write(new Date().getFullYear()); MorganStanley.Alle Rechte vorbehalten. Das Naes Unidas 14401, Torre Hotel Chcara Santo Antnio So Paulo, BR-SP. 6 Source: PPRO Asia Pacific, Western and Central Europe, North America Payments and e-commerce report 2022. Each MSIM affiliate is regulated as appropriate in the jurisdiction it operates. 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. 37% think it will remain the same, a slight increase over 2021 when only 27% of investors expected deal activity to remain flat. As the industry narrative turned from beta to alpha, there was less alpha to be had in 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. In the private markets, first-half deal activity softened but subtly so, nearly matching the record-setting pace set in 2021.

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