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Christopher Elvin Head of Private Equity, Preqin KPMG Private Equity Forum, November 2016 Private Equity Update
Christopher ElvinHead of Private Equity, Preqin
KPMG Private Equity Forum, November 2016
Private Equity Update
www.preqin.com
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Market Overview
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Private Capital has evolved
www.preqin.com
Private Capital Assets Under Management - $4.4tn as at March 2016
292 370 398 396 398 549790 993 1066 1055 984 1003 949
1216 1244 1387 1468409 367 353 456 543
661
881
1241 1188 1396 17672026 2329
2559 27072887 2906
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Mar-16
$bn
Dry Powder ($bn) Unrealised value ($bn)
Source: Preqin Private Equity Online
www.preqin.com
Alternative Assets – No Longer Alternative!
Source: Preqin H2 2016 Investor Outlook
www.preqin.com
Distinct Investor MotivationsHas PE delivered vs. LPs’ expectations?
Source: Preqin H2 2015 Investor Outlook
www.preqin.com
All Private Equity Strategies Median Net IRRs and Quartile Boundaries
Source: Preqin Private Equity Online
-5
0
5
10
15
20
25
30
35
40
45N
et IR
R (%
)
Vintage Year
IRR Q1 IRR Median IRR Q3
www.preqin.com
PrEQIn Index, 2000 - 2015
Source: Preqin Private Equity Online
0
100
200
300
400
500
600
Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15
Inde
x Re
turn
(reb
ased
to 1
00 a
s of 3
1 De
c 20
00)
All Private Equity Buyout Venture Real Estate Fund of Funds Distressed Private Equity S&P 500 Index
www.preqin.com
Returns by Asset Class – Pension Funds (as of June 2016)
Source: Preqin Private Equity Online
-10%
-5%
0%
5%
10%
15%
1 year 3 Years 5 Years 10 Years
Listed Equity Fixed Income Hedge Funds Total Investment Portfolio Private Equity Real Estate
www.preqin.com
Private Equity Capital Calls & Distributions, 2000 – 2016 (March)
11468 68 85
115135
174
271
211
156
223 239 249219
284319
789245 40 45
115 130170
250
95 110147
264 266 291
429462
125
-200
-100
0
100
200
300
400
500
Dec-
00
Dec-
01
Dec-
02
Dec-
03
Dec-
04
Dec-
05
Dec-
06
Dec-
07
Dec-
08
Dec-
09
Dec-
10
Dec-
11
Dec-
12
Dec-
13
Dec-
14
Dec-
15
Mar
-16
Capi
tal C
alle
d/ D
istrib
uted
($bn
)
Capital Called ($bn) Capital Distributed ($bn) Net Capital Distributed ($bn)
Source: Preqin Private Equity Online
www.preqin.com
Global PE Fundraising
684
548
436 403
608
759
906
1005 997
704 738
848 862935
1013930
730
207135 101 74
137
248
350413 408
208 173213 225
309347 331 296
0
200
400
600
800
1000
1200
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD
Aggr
egat
e Ca
pita
l Rai
sed
($bn
)
Year of Final Close
No. of Funds Aggregate Capital Raised (bn USD)
Source: Preqin Private Equity Online
www.preqin.com
Fundraising by First-Time Fund Managers as a Proportion of All Private Equity Fundraising, 2009 - 2016
Source: Preqin Private Equity Online
27%26% 26%
24% 23% 24%23% 23%
12%10%
20%
11%
7%6%
7% 7%
0%
5%
10%
15%
20%
25%
30%
2009 2010 2011 2012 2013 2014 2015 2016
Prop
ortio
n of
Tota
l
Year of Final Close
No. of Funds Closed Aggregate Capital Raised
www.preqin.com
Annual Global Private Capital Fundraising, 2000 – 2016YTD
871
718649 590
908
1,154
1,391
1,582 1,559
1,0451,128
1,3051,388
1,542 1,5641,460
1,021
238171 135 106
218362
544682 708
323 314 371 424
575 603 637
487
0
200
400
600
800
1000
1200
1400
1600
1800
No. of Funds Raised Aggregate Capital Raised ($bn)
Source: Preqin Private Equity Online
www.preqin.com
Private Capital Fundraising by Fund Type, 2016 YTD
145
175
97
44
311
16
90
25
56
6
55
157
86
57 51 4822 20 18 15
3 120
50
100
150
200
250
300
350
Buyout Real Estate Private Debt Infrastructure VentureCapital
Private EquitySecondaries
Growth NaturalResources
Private EquityFund of Funds
Turnaround Other
No. of Funds Aggregate Capital Raised ($bn)
Source: Preqin Private Equity Online
www.preqin.com
Private Capital Fundraising by Primary Geographic Focus, 2000 –2016YTD
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%Pr
opor
tion
of A
ggre
gate
Cap
ital
North America Europe Asia Rest of World
Source: Preqin Private Equity Online
www.preqin.com
Private Capital Fundraising Momentum, 2008 – 2016 YTD
Year Average No. of Months to First Close
Average % of Target Size at First Close
Average No. of Months to Final Close
Average % of Target Size at Final Close
2016 7 47% 16 104%
2015 7 46% 17 101%
2014 8 47% 16 104%
2013 8 46% 18 98%
2012 8 44% 17 94%
2011 7 46% 16 97%
2010 7 48% 18 92%
2009 6 52% 17 80%
2008 6 53% 15 93%
Source: Preqin Private Equity Online
www.preqin.com
Number of Private Equity Funds in Market, 2011 – Nov 2016
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Nov-16
No.
of F
unds
Other
Funds of Funds
Secondaries
Turnaround
Growth
Venture Capital
Buyout
Source: Preqin Private Equity Online
www.preqin.com
Top 10 European Private Capital Fund Domicile Locations - 2010 to 2016 Vintages
Source: Preqin Private Equity Online
14%
15%
14%
13%
23%
20%
19%
15%
17%
10%
16%
15%
16%
22%
10%
18%
17%
11%
10%
13%
9%
1%
7%
5%
9%
8%
9%
8%
6%
4%
9%
8%
6%
8%
7%
10%
4%
7%
9%
7%
5%
2%
9%
3%
5%
6%
4%
4%
5%
3%
8%
5%
4%
4%
5%
2%
6%
2%
5%
5%
4%
3%
4%
0%
2%
4%
1%
4%
2%
3%
27%
19%
21%
19%
16%
15%
19%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2010
2011
2012
2013
2014
2015
2016
Proportion of Funds
Vint
age
UK
Luxembourg
Guernsey
Cayman Islands
Jersey
France
Germany
Netherlands
Delaware
Spain
Other
www.preqin.com
PE-Backed Buyout Deals, 2007 – 2016 YTD
0
50
100
150
200
250
300
350
0
200
400
600
800
1,000
1,200
1,400
2007
Q1
2007
Q2
2007
Q3
2007
Q4
2008
Q1
2008
Q2
2008
Q3
2008
Q4
2009
Q1
2009
Q2
2009
Q3
2009
Q4
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
2012
Q3
2012
Q4
2013
Q1
2013
Q2
2013
Q3
2013
Q4
2014
Q1
2014
Q2
2014
Q3
2014
Q4
2015
Q1
2015
Q2
2015
Q3
2015
Q4
2016
Q1
2016
Q2
2016
Q3
2016
Q4
Aggregate Deal Value ($bn)N
o. o
f Dea
ls
No. of Deals Aggregate Deal Value (bn USD)
Source: Preqin Private Equity Online
www.preqin.com
PE-Backed Buyout Exits, 2007 – 2016 YTD
0
20
40
60
80
100
120
140
160
180
0
100
200
300
400
500
600
2007
Q1
2007
Q2
2007
Q3
2007
Q4
2008
Q1
2008
Q2
2008
Q3
2008
Q4
2009
Q1
2009
Q2
2009
Q3
2009
Q4
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
2012
Q3
2012
Q4
2013
Q1
2013
Q2
2013
Q3
2013
Q4
2014
Q1
2014
Q2
2014
Q3
2014
Q4
2015
Q1
2015
Q2
2015
Q3
2015
Q4
2016
Q1
2016
Q2
2016
Q3
2016
Q4
Aggregate Deal Value ($bn)N
o. o
f Exi
ts
Number of Exits Aggregate Exit Value ($bn)
Source: Preqin Private Equity Online
www.preqin.com
Venture Capital Deals, 2007 – 2016 YTD
0
5
10
15
20
25
30
35
40
45
50
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2007
Q1
2007
Q2
2007
Q3
2007
Q4
2008
Q1
2008
Q2
2008
Q3
2008
Q4
2009
Q1
2009
Q2
2009
Q3
2009
Q4
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
2012
Q3
2012
Q4
2013
Q1
2013
Q2
2013
Q3
2013
Q4
2014
Q1
2014
Q2
2014
Q3
2014
Q4
2015
Q1
2015
Q2
2015
Q3
2015
Q4
2016
Q1
2016
Q2
2016
Q3
2016
Q4
Aggregate Deal Value ($bn)N
o. o
f Dea
ls
No. of Deals Aggregate Deal Value (bn USD)
Source: Preqin Private Equity Online
www.preqin.com
Proportion of Venture Capital Deals (Value) by Region, 2007-2016 YTD
73% 72% 73%68% 67% 69% 68%
62%51% 47%
14% 12%14%
14%10%
12% 14%
10%
10%8%
9% 11% 8%12% 17% 12% 8%
16%28%
34%
3% 2% 2% 3% 3% 3%3% 6% 6% 3%
1% 1% 1% 1% 1% 1% 2% 2% 1% 2%
1% 1% 1% 2% 1% 3% 5% 4% 4% 6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Prop
ortio
n of
Agg
rega
te D
eal V
alue
North America Europe Greater China India Israel Other
Source: Preqin Private Equity Online
www.preqin.com
Venture Capital Exits, 2007 – 2016 YTD
0
10
20
30
40
50
60
0
50
100
150
200
250
300
350
400
Q1
2007
Q2
2007
Q3
2007
Q4
2007
Q1
2008
Q2
2008
Q3
2008
Q4
2008
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Aggregate Deal Value ($bn)N
o. o
f Exi
ts
Number of Exits Aggregate Exit Value ($bn)
Source: Preqin Private Equity Online
www.preqin.com
Implications for LPs and GPs
www.preqin.com
LP Satisfaction with PE Returns
7% 6%
37%48%
56%47%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
H2 2016 Preliminary H1 2017
LP Intentions for PE Allocations
Increase Allocation
Maintain Allocation
Reduce Allocation
Source: Preqin Investor Interviews, June & November 2016
www.preqin.com
Challenges
www.preqin.com
LP Return Expectations & Views on Difficulty of Identifying Attractive Investment Opportunities
www.preqin.com
GPs views on Pricing & Competition for Private Equity Transactions
www.preqin.com
Alignment of Interests
www.preqin.com
LP Use of Alternative Structures Increasing
www.preqin.com
LPs views on Brexit
www.preqin.com
GPs views on Brexit
www.preqin.com
Outlook
www.preqin.com
LPs’ Expected Capital Commitments & Intentions for GP Relationships
14% 11%
43% 50%
43% 39%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
H2 2016 Preliminary H1 2017
Amount of Capital LPs are looking to Invest in next 12 Months
More Capital in Next 12Months than Last 12Months
Same Amount of Capitalas Last 12 Months
Less Capital in Next 12Months than Last 12Months
14% 19%
16%14%
39% 40%
14% 6%
3%4%
13% 19%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
H2 2016 Preliminary H1 2017
Intentions for GP Relationships in the next 12 Months
Not Looking to Invest inComing Year
Only New GPRelationships
Mostly New GPRelationships
Mix of Re-ups and NewGP Relationships
Mostly Re-ups, ConsiderSome New GPRelationships
Entirely in Re-ups
Source: Preqin Investor Interviews, June & November 2016
www.preqin.com
LP Preferences – Fund Type & Geography
25%
4%
5%
8%
9%
11%
12%
13%
20%
21%
40%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Other
Cleantech
Natural Resources
Mezzanine
Secondaries
Distressed PE
Fund of Funds
Growth
Venture Capital
Buyout - large to mega
Buyout - small to mid-market
Fund Types LPs View as Presenting the Best Opportunities in the Current Financial Climate
0%
10%
20%
30%
40%
50%
60%
NorthAmerica
Europe Asia ROW EmergingMarkets
Other
Regions LPs View as Presenting the Best Opportunities in the Current Financial Climate
Source: Preqin Investor Interviews (Preliminary), November 2016
www.preqin.com
GPs Timeframe for Next Fund & Amount of Capital Looking to Deploy in next 12 months
22%
22%
14%
10%
20%
11%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Timeframe for Next Fund
Not planning onlaunching anotherfundUnsure
2018
H2 2017
H1 2017
Already in Market(as of Q4 2016)
29%
27%
31%
9%3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Amount of Capital Looking to Deploy in the next 12 months
Significantly LessCapital than Past 12Months
Slightly Less Capitalthan Past 12 Months
Same Amount ofCaptial as Past 12Months
Slightly More Capitalthan Past 12 Months
Significantly MoreCapital than Past 12Months
Source: Preqin Fund Manager Survey (Preliminary) – November 2016
www.preqin.com
Exit Activity Predictions
31% 35%
46% 41%
23% 24%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Private Equity Venture Capital
How will the Exit Environment Change Over the Next 12 Months?
Reduced Exit Activity
No Change
Increased Exit Activity
Source: Preqin Fund Manager Survey (Preliminary) – November 2016
www.preqin.com
Key Takeaways• PE industry has evolved and continues to grow as a result of strong long term
performance
• Distributions are driving LP appetite and fundraising - majority of LPs will maintain/increase allocations and reinvest capital received….
• BUT difficult for both for LPs and GPs to find attractive investments in highly competitive markets
• Clear current concerns – namely around valuations and performance impact
• Still a seller’s market but wider political/financial instability may cause shifting of the scales
• LPs are evolving and increasing in sophistication – directs/co-investments
• Future is bright – both LPs and GPs looking to increase activity
www.preqin.com
Data Sources
• Preqin’s online services: www.preqin.com/services
• Free reports available from www.preqin.com/research
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