Fri, Apr 10, 2020
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Private market assets under management grew by 10% in 2019

Monday, February 24, 2020

Laxman Pai, Opalesque Asia:

Private market assets under management (AUM) grew by 10 percent in 2019, and $4 trillion in the past decade, an increase of 170 percent, said a study.

According to McKinsey's annual review of private investing, the number of active private equity (PE) firms has more than doubled and the number of US sponsor-backed companies has increased by 60 percent during that period.

At the same time, global public market AUM has grown by roughly 100 percent, while the number of US publicly traded companies has stayed roughly flat (but is down nearly 40 percent since 2000).

The early prognosis for 2020 is for continued strength: by the end of 2019, large firms had announced targets collectively approaching $350 billion, more than at year-end 2018.

Further, limited partners (LPs) continue to raise their target allocations to private markets. Even at current levels, LPs appear to be under-allocated versus target levels by more than $500 billion in PE alone-as much as the global amount raised for PE in 2019.

PE outperformed its public market equivalents (PME) by most measures over the past decade, said the 2020 edition of McKinsey's annual review. Variability in performance remains substantial, however.

So, the challenge-and the potential-of manager selection remains paramount for institutional investors. Although the persistence of outperformance by PE firms has declined over time, making it harder to predict winners consistently, new academic research suggests that greater persistence may be found at the level of individual deal partners.

In buyouts, the deal decision-maker is about four times as predictive as the PE firm in explaining differences in performance. This finding is intuitive to many in the industry but remains tough for many LPs to act on.

Megafunds of $5 billion or more increasingly dominate buyout fundraising, making up more than half of the total in 2019. The share of funds below $1 billion has fallen to a 15-year low.

Yet paradoxically there is little evidence of any consolidation at the top of the industry. And even as the number of active PE firms continues to grow (it's now nearly 7,000), more managers are calling it quits than ever. Most of those raised just one fund, suggesting that attrition is mainly a result of one-and-done managers.

Deal volume declined in every region except North America, where the amount of capital invested rose 7 percent to $837 billion, a new high. Tech deals, up almost 40 percent, powered this growth. In parallel, the number of tech-focused private market firms has grown rapidly, while many others have tilted in that direction.

"Increasingly, we see general partners (GPs) that once had a technology "vertical" team now starting to view technology as a horizontal theme cutting across many of their deals," the report said.

US buyout multiples climbed yet again in 2019, continuing a decade-long trend, to reach nearly 12x. Leverage surpassed levels last seen in 2007.

Dry powder rose further due to record fundraising and stagnant deal volume. It now stands at a record $2.3 trillion. PE accounts for most of this total, though PE dry powder is still less than two "turns" of annual deal volume, within the range of historical norms.

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing: Ray Dalio's Bridgewater scales down European short bets after $3.2bn windfall, Here's what top hedge funds are buying in the coronavirus stock market crash[more]

    Ray Dalio's Bridgewater scales down European short bets after $3.2bn windfall From Financial News: Bridgewater Associates, the world's biggest hedge fund, has retreated from shorting European stocks after making an estimated €2.9bn ($3.2bn), as its founder and co-chairman Ray Dalio c

  2. Bill Ackman writes letter to shareholders on coronavirus[more]

    Pershing Square Holdings (PSH)'s Bill Ackman wrote a letter to investors outlining his insight on the coronavirus pandemic in the United States. He revealed that PSH completed the process of exiting the hedges on 23 March, netting a gross $2.1bn for PSH, after turning 'increasingly positive on equit

  3. New Launches: LGPS Central sets up investment grade bond fund, Leeds Equity Advisors aims to raise $1bn for PE fund, RLI Investors to launch European last-mile logistics fund, DBL Partners IV targets $450m[more]

    LGPS Central sets up investment grade bond fund From IPE: LGPS Central, the asset pooling vehicle for eight local government pension schemes (LGPS) based in England's Midlands, has launched a global investment grade corporate bond fund in order to meet its partner funds' needs. The po

  4. Investing: Marathon sees cheap assets amid dislocation in credit, Deerfield's health care buying spree, It's time to buy shares again, says BlackRock, Credit Suisse, Fed is buying credit ETFs but one hedge fund is shorting them[more]

    Marathon sees cheap assets amid dislocation in credit From Bloomberg: Distressed-investment specialist Marathon Asset Management is buying beaten-up debt amid the greatest dislocation in credit markets since 2008, according to Bruce Richards, co-founder and chief investment officer of the

  5. People: Carlyle picks 2 deputy heads for Japan buyout advisory team, Ex-Kleinwort Hambros adviser takes senior role at multi-family office boutique[more]

    Carlyle picks 2 deputy heads for Japan buyout advisory team From Takaomi Tomioka and Hiroyuki Otsuka were named deputy heads of the Japan buyout advisory team at Carlyle Group. The positions are new, confirmed a spokeswoman for the New York-based private markets investment g