Please read and agree to the Privacy Policy. 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. Here's what it means for private investors. [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. Contenders for the third sector of choice are the Consumer (35%) and Industrials (34%) sectors. Digital innovation and transformation across existing workflows are imperative for PE firms wishing to maintain a competitive edge among peers. Going into 2022, PE/VC investors are mainly concerned about the changes to the economic environment. 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. 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). In Europe, an 11-year run of fundraising growth ended, largely due to geopolitical instability and broader macroeconomic challenges, including volatility in foreign currency exchange rates. The deal-making momentum of 2021 continued through the first half of 2022, and despite the striking slowdown in second-half deal activity, 2022 remained the second most active year on record. OPAQUE ENTRY VALUATIONS Almost 17% of PE professionals from that region anticipate the investment landscape will deteriorate in 2022. Source: AVCJ Research, as of 31 December 2022. 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%). As institutional capital gravitates toward massive generalist private market managers with well-established . And it's no wonder why, with its record performance in 2021. 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. Across our clients, we see ESG becoming a competitive differentiator and driver of returns. [7] S&P Capital IQ Pro Platform (as of 27/01/2022). Expanding capitalization (cap) rates across sectors, which represent the multiple investors are willing to pay for net operating income (NOI), drove performance lower. 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. *I have read thePrivacy Policyand agree to its terms. 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. 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. Real estate (23 percent) and private equity (15 percent) declined most precipitously from 2021s record highs, while private credit (+2 percent) proved more resilient. Like deal-making, fundraising also saw an upward growth trajectory in 2021 as money flew abundantly into private markets. (As of 09/09/2021). [12] Robust private equity exits may set record year. Bain's Nirad Jain and Kara Murphy share insights from our annual report. Compared with a heady prior decade of robust growth, 2022 was a subdued year in the private markets. 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. Australia: This material is disseminated in Australia by Morgan Stanley Investment Management (Australia) Pty Limited ACN: 122040037, AFSL No. A strengthening dollar accounted for a material portion of the dollar-based decline in fundraising in non-US markets. 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. 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. S&P Global. FT Adviser. 7 An efficient market is one where the market price is an unbiased estimate of the true value of an investment. In our podcast series, Bain's Hugh MacArthur interviews leading experts on the trends and opportunities that will redefine the private equity industry. Open-end funds in the US grew NAV by 24 percent, with contributions exceeding distributions for the first time in two years. 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 . 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. The Covid-19 pandemic re-emphasized the importance of localized operations, as closed borders made it impossible for non-local managers to undertake transactions. In terms of advanced digitization, 14% declare their organizations have advanced to the point of leveraging data science for automated deal sourcing and due diligence, while only 7% of respondents said that digital technologies have been fully implemented into their playbook. Together, we achieve extraordinary outcomes. However, cap rates started expanding toward the end of 2022, signaling heightened uncertainty across real estate markets. This material was not intended or written to be used, and it cannot be used with any taxpayer, for the purpose of avoiding penalties which may be imposed on the taxpayer under U.S. federal tax laws. Many attributes of businesses located in Asia are well-suited to operational improvements that can both further growth and increase margins. This year we also included a question on investors advances on their digitization and automation journey. Tighter financial conditions and general risk aversion continued to slow activity across the venture capital industry in the fourth quarter of 2022. Fundraising results differed notably across geographies, more so than in previous years. Exits in the region are notoriously complicated, as tighter public markets limit IPO options and geopolitical uncertainty clouds valuations. 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 research defines outperformers as companies whose score on a series of assessed ESG metrics improved over time. 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. On some diversity metrics, private markets firms compare favorably with corporate America, although ethnic diversity is not yet broad based. Global Private Equity Report 2023 | Bain & Company 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. 2 Preqin, data as of September 2022. 10 Morgan Stanley Research, Investor Presentation India Banks, November 11, 2022. 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). Despite this, stakeholders are expecting 2022 to be a year of action on ESG issues, not just for climate change as expected but also for rising concerns over social issues[10]. In unserem monatlichen Global Equity Observer finden Sie unsere Gedanken zu weltweiten Ereignissen aus Sicht unseres qualitativ hochwertigen Anlageprozesses. The third risk factor concerning PE/VC firms this year has changed considerably from last year. Survey of private equity (PE) and venture capital (VC) firms 2022 The contents of this material have not been reviewed nor approved by any regulatory authority including the Securities and Futures Commission in Hong Kong. The mood changed in early summer. As measured by year-to-date IRR as of September 30, 2022, for global funds vintages between 2000 and 2019. The adoption of technology within China over the past two decades is a good example. In addition to the copycat model, Asian markets have demonstrated a leapfrog phenomenonwhereby one region replicates and rapidly improves upon an innovation witnessed elsewhere. Under-penetration of financial services and modern retail presented an opportunity for China to develop more advanced solutions than what existed in the West. This material has been issued by any one or more of the following entities: EMEA: This material is for Professional Clients/Accredited Investors only. Andrew Slimmon, Lead Portfolio Manager der Fonds und Strategien des Applied Equity Advisors Teams, teilt seine Einschtzung der Finanzmrkte. The Netherlands: MSIM FMIL (Amsterdam Branch), Rembrandt Tower, 11th Floor Amstelplein 1 1096HA, Netherlands. Clients should always consult with a legal or tax advisor for information concerning their individual situation. Increasing representation across all levels will require managers to take fresh approaches to hiring, retention, and promotion. 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). 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. 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. 3 Preqin, data as of July 2022. 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]. Example: 70% of all Europe-based investors responded that they are planning of making investments in Software & Services. For more from Dry Powder on the report, you can listen to Three Essential Trends . The number of buyout and growth deals greater than $500 million decreased by 33 percent. 22% of respondents say their firms are exploring digital technologies while 7% say their firms are close to making the final decision. (As of 13/01/2022). Finally, amid the broader slowdown in technology-oriented PE deal making, investments in property technology companies fell to the lowest total in five years. 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. Globally, fundraising fell 15 percent from the all-time high achieved in 2021 (Exhibit 3). Morgan Stanley does not render tax advice on tax accounting matters to clients. 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. Because of the deterioration in technology valuations, VC and growth equity returns led the fall, in stark contrast to the last several years.