Insights Blog: Five Findings from COP27 with Vikram Raju. A United Nations-supported network of investors promoting sustainable investment. Andrew Slimmon, Lead Portfolio Manager der Fonds und Strategien des Applied Equity Advisors Teams, teilt seine Einschtzung der Finanzmrkte. A strengthening dollar accounted for a material portion of the dollar-based decline in fundraising in non-US markets. Retrieved from: https://www.ey.com/en_us/private-equity/pulse, [10] Key Trends that will drive the ESG agenda in 2022. As the industry narrative turned from beta to alpha, there was less alpha to be had in 2022. On average, 56% of respondents believe deal activity will improve in the next 12 months. 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. Each MSIM affiliate is regulated as appropriate in the jurisdiction it operates. 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. Capital deployments into larger vehicles increased as investors re-upped with existing managers while forgoing commitments to smaller and newer managers. The contents of this material have not been reviewed nor approved by any regulatory authority including the Securities and Futures Commission in Hong Kong. Like the strategies for other asset classes, infrastructure and NR strategies were affected by macroeconomic challenges. 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 markets fundraising fell 11 percent to $1.2 trillion, as the denominator effect affected some LPs ability to allocate capital. Yet, like most private market segments, real estate experienced a downturn in 2022 compared with the record year it followed. FT Adviser. Market Intelligence 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. 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. Markets climbed higher still, awash with central-bank-induced liquidity. Leapfrog tech potentially has the ability to further accelerate growth, thereby offering the opportunity for outsized returns. 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. As institutional capital gravitates toward massive generalist private market managers with well-established . While fundraising and investment performance declined, the industrys growth held reasonably steady, with assets under management increasing to $11.7 trillion as of June 30, 2022 (Exhibit 2). 11 Bain & Company, "Asia-Pacific Private Equity Report 2022". Deal volume fell 20 percent, declining in each consecutive quarter throughout the year (Exhibit 5). Morgan Stanley does not render tax advice on tax accounting matters to clients. [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. January 31st, 2023. The continued momentum in 2022 was understandable, as debts current yield and senior position in the capital stack have long made it a haven in volatile periods. Many attributes of businesses located in Asia are well-suited to operational improvements that can both further growth and increase margins. Valuation multiples have been falling across both public and private markets, with venture capital positions arguably the most . of the securities, and MSIMJ accepts such commission. 3 Preqin, data as of July 2022. On some diversity metrics, private markets firms compare favorably with corporate America, although ethnic diversity is not yet broad based. www.preqin.com, [4] S&P Capital IQ Pro Platform (as of 27/01/2022). Direct lending fundraising declined from 2021, but only marginally, raising over $100 billion for the second consecutive year. Venture capital assets under management tripled between December 2016 and March 2021, from $574bn to $1.68tn. 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. A surge in deal-making drove global private equity deal value to a total of $603 billion as of October 2021, or $804 billion on an annualized basis, which Preqin notes would surpass a record the industry set in 2007. Retrieved from: https://pages.marketintelligence.spglobal.com/2021-Year-in-Review-Investment-Banking-Infographic.htm. McKinseys Private Markets Annual Review: 2017 to 2022. For illustrative purposes only.[8]. Financial services (2.5 times) and information technology (2.2 times) recorded the largest multiple declines among PE subsectors, while rising commodity prices drove multiple expansion in raw materials and resources (+2.6 times). 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. The market environment in the next few years will present further dislocation and opportunity for fundamental value creation. Bain's Global Private Equity Report examines the industrys strengths, its challenges, and the evolutionary path that lies ahead. Exit activity bounces back and set for another active year. 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. 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. As overall GDP growth slows, efficiency improvement will become increasingly more important. And the ongoing war and humanitarian crisis in Ukraine further exacerbated risks to the global economy, including higher commodity prices and disrupted supply chains. For example, in Japan, deals are often won based on trust, not price, as sellers look for buyers who will preserve their legacy post-transaction. 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. Registered Office: Beethovenstrasse 33, 8002 Zurich, Switzerland. Screening results include only M&A Exits not IPOs. Last year may go down as a pivotal year in the history of alternative assets. 2021 was an exceptional year for exits: not only did the number of exits increase by 34% from 2020, but exit value also increased by 57%. ITS NOT JUST THE PRICE Compared with a heady prior decade of robust growth, 2022 was a subdued year in the private markets. 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). Principles for Responsible Investment, annual report, 2022. [9]Many PE investors now consider ESG factors when building and managing their portfolio. 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. *I have read thePrivacy Policyand agree to its terms. 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 Registered in England. 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). Source: S&P Global Market Intelligence. 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. Bookmark content that interests you and it will be saved here for you to read or share later. Companies with cutting-edge tech and design can be positioned for Asia and/or global expansion and sold at a premium valuation. 11 Bain & Company, Asia-Pacific Private Equity Report 2022. Closed-end fundraising declined 23 percent year over year. A defining characteristic of Asian markets is the way geopolitical and cultural factors inform how business is done. 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. France: MSIM FMIL (Paris Branch), 61 rue de Monceau 75008 Paris, France. Geopolitical risks, currency risks, and exits/liquidity are important considerations for investors contemplating an allocation to Asian private equity, and adequately addressing these risks are undoubtedly key to achieving positive performance in Asian markets. The research defines outperformers as companies whose score on a series of assessed ESG metrics improved over time. Das Naes Unidas 14401, Torre Hotel Chcara Santo Antnio So Paulo, BR-SP. 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. Open-end funds in the US grew NAV by 24 percent, with contributions exceeding distributions for the first time in two years. For more from Dry Powder on the report, you can listen to Three Essential Trends. On aggregate those funds raised $845.5 billion capital across various strategies, with growth capital funds seeing the largest upsurge. 13 Russell Reynolds, Transitioning to the Next Generation: Leadership succession within family businesses in Southeast Asia, November 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. In the early 2000s, Chinas tech industry followed a copycat model, with consumers adopting technology that had proven successful in the U.S. (As of 31/01/2022). Global private markets fundraising declined by 11 percent to $1.2 trillion. LP willingness to allocate more capital to diverse deal teams is prompting more GPs (52 percent in 202122) to share DEI data during fundraising. Source: Preqin Pro as of September 30, 2022, COPYCAT MODELS ACCELERATING GROWTH The pattern in 2021 and 2022 was no different: despite rising US Treasury (UST) rates, cap rates decreased and values rose. Even in 2020, when activity stalled briefly during the early months of the COVID-19 pandemic, private markets hummed again in the second half. 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. Economic environment at the forefront of risk concerns. Across our clients, we see ESG becoming a competitive differentiator and driver of returns. 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). In Switzerland, MSIM materials are issued by Morgan Stanley & Co. International plc, London (Zurich Branch) Authorised and regulated by the Eidgenssische Finanzmarktaufsicht (FINMA). Office, retail, and hospitalitythe sectors most affected by pandemic-driven changes in working, shopping, and travelingshowed signs of emerging stability. 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. 'Private Capital' will refer to the broader spectrum of private closed-end funds, including private equity, private debt, private real estate, infrastructure and natural resources. Australia: This material is disseminated in Australia by Morgan Stanley Investment Management (Australia) Pty Limited ACN: 122040037, AFSL No. 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. The adoption of technology within China over the past two decades is a good example. 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). Retrieved from: https://www.capitaliq.spglobal.com/web/client?auth=inherit#news/article?id=66494139. 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. 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. Clients should always consult with a legal or tax advisor for information concerning their individual situation. And while infrastructure and NR fund performance declined somewhat from 2021, these funds were the top-performing private markets asset classes in 2022. Total private markets assets under management (AUM) reached $11.7 trillion as of June 30, 2022. Private equity's global dry powder, or uninvested capital, stood at a record $1.3 trillion as of September 2021, according to Preqin. 2022 Preqin Global Private Equity Report. 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. Please consider the investment objectives and nature of risks before investing. OPAQUE ENTRY VALUATIONS Investing in Asian private equity comes with a unique set of challenges and risks beyond what this paper has explored. [11] S&P Capital IQ Pro Platform (as of 25/01/2022). 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. Going forward, shifting macroeconomic conditions will make efficiency initiatives an increasingly important value driver in Asian private equity. In the first half of 2022, central banks fought roaring inflation by sharply raising interest rates, and public market valuations cratered. On average, 56% of respondents believe deal activity will improve in the next 12 months. By Cameron Joyce, CFA and Michael Patterson. 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. Funds over $5 billion collected a record $445 billion in aggregate, a 51 percent increase over funds of a similar size in 2021. The growth rate was lower MSIMJ exercises the delegated authorities based on investment decisions of MSIMJ, and the client shall not make individual instructions. 2 Preqin, data as of September 2022. Environmental issues and regulations, lack of financing and raw materials, logistics and high valuations are other topics of concern on investors minds. PE buyout entry multiples declined slightly in 2022, falling to 12.9 times EBITDA from a record 13.2 times a year ago, while public market multiples compressed dramatically, declining to 12.0 from 14.6 times EBITDA. 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. 314182, which accept responsibility for its contents. equity, real assets, and debt capital markets. S&P Global. 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). (As of 09/09/2021). Private markets have enjoyed strong tailwinds since the depths of the Global Financial Crisis (GFC). Second, LPs are increasingly incorporating ESG metrics into their capital allocation processes. Most of the current fund commitment decisions were made last year, which was impacted by the denominator effect as public markets . First-time fund launches also decreased by 40 percent. Since these charges and expenses are different depending on a contract and other factors, MSIMJ cannot present the rates, upper limits, etc.