Industry Development & Market Outlook · 4 Global Alternative Assets AUM at a Record High...
Transcript of Industry Development & Market Outlook · 4 Global Alternative Assets AUM at a Record High...
5th Annual European Fund Finance Symposium – 20th June 2019
Christopher Elvin, Head of Private Equity Products
Industry Development & Market Outlook
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Private Equity
Venture Capital
Private Debt
Hedge Funds
Real Estate
Infrastructure
Natural Resources
About Preqin
1.Where Are We Now?
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Global Alternative Assets AUM at a Record High – $9.8tn
522 577 646 706 778 892 921 999 1,066
1,193 1,338
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1,000
2,000
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Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Sep-18
AUM
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Global Private Capital AUM by Geographic Focus
North America Europe Asia ROW (exc Asia)
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2,000
4,000
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Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Sep-18
AUM
($bn
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Global Alternative Assets AUM by Asset Class
Hedge Funds Private EquityReal Estate InfrastructurePrivate Debt Natural Resources
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Private Capital Fundraising ‘Slows’ From 2017 Highs but $838bn Raised Globally in 2018, $211bn focused on Europe
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Annual Private Capital Fundraising by Asset Class
Private Equity Real Estate Infrastructure Private Debt Natural Resources
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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019YTD
European Focused Private Capital Fundraising
No. of Funds Aggregate Capital Raised
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Steady Trend of Capital Flowing to Top Managers Signaling Increased Capital Consolidation
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Record Levels of Capital Available to Invest - $2.2tn
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Despite Challenging Deal Environment 2018 Saw Record Buyout Activity BUT… 2019 Has Shown Sign of Slowdown
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2014 2015 2016 2017 2018 2019
Aggregate Deal Value ($bn)No
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eals
North America Europe Asia Rest of World Aggregate Deal Value ($bn)
Private Equity-Backed Buyout Deals by Region, Q1 2014 - Q1 2019
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Similar Trend For European Venture, Real Estate and Private Debt Deals
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European Venture Deals
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European Real Estate Deals
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European Private Debt Deals
No. Deals Deal Value ($bn)
2.Where Do We Go From Here?
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Preqin Predicts Alternative Assets Growth to Continue - $14tn by 2023
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AUM
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Alternative Assets AUM
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Private Equity to Overtake Hedge Funds. Private Debt to Overtake Real Estate
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Growth to be Driven by Investor Demand – More than 12,000Active Institutional Investors in Alternatives
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The Role of Alternatives in a Low Return Environment
10% 10% 9%16% 10%
55%
64% 64%73% 61%
60%
37%
26% 26%18% 23% 29%
8%
0%
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Private Equity Real Estate Private Debt Infrastructure NaturalResources
Hedge Funds
Investor Views on Portfolio Performance Over Past 12 months
Fallen short of expectations Met expectations Exceeded expectations
Median Public Pension Plan Returns by Asset Class
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Looking Beyond Sheer Returns: Investors are Using Alternative Assets for Many Reasons
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Private Equity & Private Debt
Private Equity: Diversify to Add High Risk-Adjusted and Absolute Returns
Private Debt: Diversify to Add High Risk-Adjusted Returns & a Reliable Income Stream
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Real Estate, Infrastructure, Hedge Funds and Natural Resources
Real Estate and Infrastructure: Diversify as an Inflation Hedge and for a Reliable Income Stream
Hedge Funds & Natural Resources – to Diversify to Reduce Correlation (& An Inflation Hedge For NR)
3.How To Be Part of the Alternatives Industry in 2023
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Record No. of Funds in Market – 5,558 targeting $1.6tn
1,561 1,6191,845 1,949 2,098 2,235
2,6512,965
3,342
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699 607 758 797 733 793 946 1,0081,206
1,523 1,573
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Private Capital Funds in Market: 2010 to 2019
No. Funds in Market Aggregate Capital Targeted ($bn)
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231
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71 64 62
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Private Equity Venture Capital Real Estate Private Debt Infrastructure NaturalResources
Europe-Focused Private Capital Funds in Market – June 2019
No. Funds in Market Aggregate Capital Targeted ($bn)
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Changes in Sources of Capital
32% 29%
9% 9%
30% 34%
31%
57%
38% 37%
60%
34%
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NorthAmerica
Europe Asia-Pacific EmergingMarkets
Fund Managers’ Projected Change in Level of Capital Sourced from
Each Region by 2023
Decrease Stay the Same Increase
-41% -30%-13%
-40%-16% -12% -7% -8% -7% -5%
9% 15% 26% 28% 38% 41% 44% 49% 50%65%
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30%
50%
70%
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Banks DB PensionFunds
DC PensionFunds
Fund ofFunds
Managers
PublicPensionPlans
PrivatePensionPlans
EndowmentPlans
Foundations SovereignWealthFunds
FamilyOffices
Fund Manager Views on Investor Types as a Source of Capital
Decrease Investment Increase Investment
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Investors Plan to Focus More on Specialists and Alternative Routes to Market
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Managers with ESG Policies Expected to Double by 2023
§ 79% of fund managers either have an ESG policy in place for alternative assets or plan to in the next five years
§ 67% of fund managers are implementing due to demand from LPs
§ Hedge fund managers may need to reconsider their stance on ESG
Alternative Managers Plans for ESG Policies
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Fund Managers May Need to Move Faster to Improve Diversity
Fund Managers and Investors with Diversity Policies in Place for Their
Workforce§ 56% and 60% of investors and fund
managers respectively believe a diverse workforce is beneficial to achieving investment objectives
§ Preqin research shows less than 18% and 19% of all roles at private equity and hedge fund firms are filled by women.
§ Over a quarter of investors either have or plan to have a diversity policy in place for hiring investment managers in the next five years
Investors with Diversity Policies in Place for Hiring
Investment Managers
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Invest in Technology and Data
§ Fund managers plan to use technology across their operations over the next 5 years
§ 89% and 75% of investors and fund managers respectively believe AI and machine learning will be more relevant to alternatives in 2023
§ 43% of fund managers are currently or plan to use big data processes in the next five years
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The Future of Alternatives
§ We expect alternative assets AUM to hit $14tn in 2023 – but given the tailwinds could go higher.
§ Driven by an evolving ecosystem of investors seeking yield and to diversify risks in portfolios, as well as new opportunities globally.
§ Investment focus will move away from the more developed markets as better opportunities become available in Asia and Emerging Markets.
§ And continued innovation by alternative managers leading to new products.
§ ESG and technology will continue to have significant impacts on the industry.
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