Post on 13-Apr-2017
transcript
Global Private Equity Outlook – April 2016
Navigating in Uncertain Times – Challenges and Opportunities
London, 28th April 2016
• The long term picture
• Q1 2016 - turbulent times
• A word about Private Debt
• Challenges and Opportunities for GPs and LPs
Operational Excellence & Transparency
• Private Equity:
o Buyout, Venture, Growth, Turnaround, Secondaries, Fund of Funds, Other ‘core’ PE
• Private Capital:
o PE + Private Debt + Private Real Estate + Infrastructure + Natural Resources
Definitions
“Follow The Money” – LPs’ PE Return Expectations
Source: Preqin 2016 H1 Investor Outlook
Private Capital Returns – PrEQIn Index 2000 - 2015
Source: Preqin 2016 Global PE & VC Report
Private Capital Returns – PrEQIn Index 2000 - 2015
Source: Preqin 2016 Global PE & VC Report
+ / - 400 BP p.a.
Returns by Asset Class – Pension Funds
Source: Preqin 2016 Global PE & VC Report; median returns for pension funds by asset class
Returns by Asset Class – Pension Funds
Source: Preqin 2016 Global PE & VC Report; median returns for pension funds by asset class
+ / - 400 BP p.a.
LP Satisfaction with PE Returns
Source: Preqin Investor Outlook H1 2016
Long Term Allocation Intentions
Source: Preqin Investor Outlook H1 2016
Private Capital AUM, 2000 - 2015
Source: Preqin 2016 Global PE & VC Report
LPs Below / On / Above Target PE Allocation
Source: Preqin 2016 Global PE & VC Report
Private Capital Calls & Distributions, 2000 – 2015
Source: Preqin 2016 Global PE & VC Report; 2015 is estimate based on H1 annualized
Private Capital – Net Cash Flows for LPs, $bn
Source: Preqin Asia PE Report November 2015; Preqin PE Online
‘Net Call’
‘Net Dist’
LPs’ Expected Commitments 2016 vs. 2015
Source: Preqin Investor Outlook H1 2016
Global Private Capital Fundraising – Final + Interim Closes Qly
Source: Preqin 2016 Global PE & VC Report
Global Private Equity Fundraising – Final + Interim Closes Qly
Source: Preqin 2016 Q1 PE Quarterly
Global Buyout & Growth Deals, 2006 - 2016
Source: Preqin Buyout Deals Analyst
Global Buyout & Growth Deals, 2006 - 2016
Source: Preqin Buyout Deals Analyst
What Has Changed? – Market Volatility and Credit Spreads
Source: St Louis Federal Reserve - US High Yield B Option-Adjusted Spread
Global Buyout Deal Value vs. US Credit Spreads, 2006 – 2016Q1
Source: Preqin deals data; Fed Reserve credit spread data (BofA Merrill Lynch US High Yield B Option-Adjusted Spread)
Where Are We Now?
Source: St Louis Federal Reserve - US High Yield B Option-Adjusted Spread
1: Reasonable Discipline Post-GFC
Source: Preqin Performance Analyst database
2: Performance of PE During / Post GFC
Source: Preqin Performance Analyst database
2: Performance of PE During / Post GFC
Source: Preqin Performance Analyst database
Fundraising Outlook - 2016
Negative Factors
• Reluctance to commit at time of uncertainty
• Evidence of stabilizing appetite during 2015?
Positive Factors
• PE’s track record• PE Relatively well-
positioned• Commit now to
invest at lower valuations?
Fundraising Outlook - 2016
Negative Factors
• Reluctance to commit at time of uncertainty
• Evidence of weakening appetite during 2015?
Positive Factors
• PE’s track record• PE Relatively well-
positioned• Commit now to
invest at lower valuations
• 2016 will probably prove to be an OK / Good vintage • But, suspect it’s likely to be a tougher year for fundraising
To summarise… We have seen a difference in the expected LP commitments versus what has really
been happening in Q1 2016
PE has been significantly more active in paying cash out to LPs than in the run-up to the GFC
And has also been significantly more cautious in calling money up for new investments . . .
So the aggregate portfolio is significantly more mature than at the time of the start of the GFC
Hence we can expect it to be correspondingly more robust
Global Private Debt Fundraising by Year
Vintage Year
Number of Funds
Aggregate Capital Raised
(bn)
Average Fund Size
(mn)
Q1 2016 15 $7.8 $589
2015 134 $89.5 $728
2014 137 $76.0 $608
2013 157 $81.1 $555
2012 104 $63.4 $661
2011 96 $46.2 $531
2010 89 $40.9 $499
Global Private Debt Fund Raising by Year
European Private Debt Fundraising by Year
Vintage Year
Number of Funds
Aggregate Capital Raised
(bn)
Average Fund Size
(mn)
Q1 2016 4 $4.1 $1377
2015 34 $30.9 $997
2014 46 $24.5 $544
2013 39 $19.7 $548
2012 26 $18.2 $727
2011 18 $12.6 $701
2010 17 $6.0 $397
European Private Debt Fundraising by Year
Europe Focused Direct Lending– Fundraising by Year
Vintage Year
Number of Funds
Aggregate Capital Raised
(bn)
Average Fund Size
(mn)
Q1 2016 2 $1.1 -
2015 16 $18.8 $1346
2014 17 $13.2 $778
2013 15 $8.5 $610
2012 6 $3.5 $584
2011 2 $1.1 $550
2010 5 $2.9 $716
Europe Focused Direct Lending Fundraising by Year
Challenges & Opportunities for GPs- 1: Competition
Source: Preqin LP Survey Q1 2016
Challenges & Opportunities for GPs- 2: Factors of Importance to LPs1
Source: Preqin LP Survey Q1 2016
(1) “Which of the following characteristics are most important in identifying a superior fund manager?”
Challenges & Opportunities for GPs- 2: Factors of Importance to LPs1
Source: Preqin LP Survey Q1 2016
(1) “Which of the following characteristics are most important in identifying a superior fund manager?”
Challenges & Opportunities for GPs- 3: Operational Excellence
Source: Preqin LP Survey Q1 2016
(1) “Which are the most important features or areas of “operational excellence” in a firm?”
Challenges & Opportunities for GPs- 3: Operational Excellence
Source: Preqin LP Survey Q1 2016
(1) “Which are the most important features or areas of “operational excellence” in a firm?”
Key Takeaways
• Long term, excellent prospects for Private Equity, Private Debt and other Private Capital
• Turbulence / volatility means 2016 may well be tough, but funds will get raised
• LPs increasingly demanding on:• GP team quality• History of strong returns• Operational Excellence• Alignment of interest with GPs
• What can Baxon Solutions help you with?• Operational excellence . . . to help differentiate you in the eyes of your
current and prospective LPs• Deliver insights on how you have added value to portfolio companies• (And increase your control and cost-effectiveness)
Key Takeaways
• Long term, excellent prospects for Private Equity, Private Debt and other Private Capital
• Turbulence / volatility means 2016 may well be tough, but funds will get raised
• LPs increasingly demanding on:• GP team quality• History of strong returns• Operational Excellence• Alignment of interest with GPs
• What can Baxon Solutions help you with?• Operational excellence . . . to help differentiate you in the eyes of your
current and prospective LPs• Deliver insights on how you have added value to portfolio companies• (And increase your control and cost-effectiveness)
Actionable
Baxon contribution on Operational Excellence Better client service:
Faster response to LP queries Ability to provide data in LP preferred Excel templates with no additional effort
Data quality: Portfolio information traceable support by formal sign off process Golden source of data across all the organization
Compliance: Valuation frameworks, LP reports and ESG reporting continuously updated to meet
regulations and guidelines Timeliness:
Valuation process reduced to 2 weeks Monitoring process in 2-3 weeks
Risk assessment: Constant automatic aggregation of portfolio exposure Risk indicators and early warning alerts
More transparent, robust and efficient portfolio management
Thank You!
• Further information from Baxon Solutions
• Further information / reports available from Preqin