How do you see the opportunity in your obstacles? Key findings from the 2019 Global Private Equity Survey

Transcription

1 How do you see the opportunity in your obstacles? Key findings from the 2019 Global Private Equity Survey For the complete survey findings, go to ey.com/pesurvey.

2 01 Investor capital continues to pour into private equity firms, and CFOs seek new ways to support their businesses in scalable ways

3 Private equity presents competition for the hedge fund industry 24% 39% of investors allocate their assets to alternatives of investors expect to allocate more capital to private equity firms 18% of investors alternatives portfolios are made up of traditional private equity investments Key findings from the 2019 Global Private Equity Survey 2

4 76% of CFOs note asset growth is the top priority The private equity industry has seen meaningful growth over the past two years 52% of CFOs expect to raise a new fund in % of CFOs expect the new fund will be larger than the last 3 Key findings from the 2019 Global Private Equity Survey

5 Private equity CFOs seek to expand their product offerings to grow assets 59% 34% of private equity managers are launching new strategies to expand product offerings and grow assets of private equity managers offer or plan to offer real estate, real assets and venture capital in the next two years 35% 21% of private equity managers offer or plan to offer private credit in the next two years of private equity managers offer or plan to offer hedge fund vehicles in the next two years Key findings from the 2019 Global Private Equity Survey 4

6 05 There is a cost to growing assets rapidly, causing margin erosion at many management companies

7 Few managers have seen margins improve over the past two years 39% 28% of CFOs note margins have decreased of CFOs note margins have increased 33% of CFOs note margins are unchanged Key findings from the 2019 Global Private Equity Survey 6

8 Managers are acting to mitigate erosion 29% 57% 14% of CFOs are taking a long-term and strategic approach to mitigate margin erosion of CFOs are taking a mix of strategic and tactical actions to mitigate margin erosion of CFOs are taking a short-term and tactical approach to mitigate margin erosion 7 Key findings from the 2019 Global Private Equity Survey

9 Private equity firms are looking at a number of areas to reduce costs 39% of CFOs note technology is a high priority to mitigate erosion 37% of CFOs note outsourcing is a high priority to mitigate erosion Key findings from the 2019 Global Private Equity Survey 8

10 09 Technology might not be a quick fix, but private equity CFOs see the long-term benefit of a digital future

11 The private equity industry is making significant investments in technology 66% 57% of CFOs have invested in technology in fund accounting of CFOs have invested in technology in accounts payable and time and expenses 62% 56% of CFOs have invested in technology in investor relations of CFOs have invested in technology in compliance and regulatory reporting Key findings from the 2019 Global Private Equity Survey 10

12 Technology investments do not always pay off in the short term 6% only of firms report technology investments decreased valuation expenses 8% just of firms report technology investments decreased portfolio analysis expenses 10% a small of firms report technology investment decreased investor relations expenses 33% of firms report technology investment decreased tax expenses 40% of firms report technology investment decreased accounts payable and time and expenses 11 Key findings from the 2019 Global Private Equity Survey

13 The largest private equity managers are looking to use robotics in the back office, but industry awareness remains low 52% of the largest private equity firms are planning to make an investment in robotics 10% just of the smallest private equity firms are planning to make an investment in robotics 60% of CFOs at firms of all sizes are unaware of the breadth of robotics solutions available and their capabilities Key findings from the 2019 Global Private Equity Survey 12

14 Most private equity managers feel confident their workforce is technologically and data literate 76% 74% of CFOs report their workforce is technologically and data literate in the front office of CFOs report their workforce is technologically and data literate in the back office 13 Key findings from the 2019 Global Private Equity Survey

15 Many managers believe the upfront spend on technology will ultimately lead to additional efficiencies going forward Key findings from the 2019 Global Private Equity Survey 14

16 15 Private equity CFOs place diversity high on their agenda, prioritizing gender and cultural diversity, and also digital and analytics backgrounds

17 CFOs place talent management high on their list of strategic priorities 60% of CFOs rank talent management as a top strategic priority 54% of CFOs don t have a formal talent management program in place yet Key findings from the 2019 Global Private Equity Survey 16

18 Private equity managers are looking to diversify their workforce 79% 63% of CFOs seek to improve gender diversity of CFOs seek to improve cultural diversity 17 Key findings from the 2019 Global Private Equity Survey

19 The profile of candidates that private equity CFOs seek has changed, but generally a 3:1 ratio of investment to finance professionals is preferred 50% of CFOs have changed the profile of the candidates they evaluate, interview and ultimately hire relative to 5 to 10 years ago 63% of CFOs are satisfied with their ratio of investment to finance professionals Key findings from the 2019 Global Private Equity Survey 18

20 Investors are laser focused on talent programs as part of investment due diligence 78% of investors request info about a firm s talent management process of those that request this information 68% say it s critically important for managers to have a talent management program in place 19 Key findings from the 2019 Global Private Equity Survey

21 Talent management programs are quickly becoming a necessity Key findings from the 2019 Global Private Equity Survey 20

22 21 Often overlooked, outsourcing is a key competitive advantage for fighting margin compression

23 Private equity managers realize the benefits in cost savings are significant 94% 55% report to outsource tax to some degree report to outsource fund accounting to some degree 71% report to outsource compliance and regulatory reporting to some degree Key findings from the 2019 Global Private Equity Survey 22

24 82% 62% of CFOs don t outsource portfolio analysis of CFOs don t outsource treasury Yet, some managers still keep key functions in-house 70% of CFOs don t outsource valuation 62% of CFOs don t outsource investor relations 71% of CFOs don t outsource accounts payable and time and expenses 23 Key findings from the 2019 Global Private Equity Survey

25 Many private equity firms pass through the costs to their outsource providers 89% 67% of managers report to pass through costs of fund accounting services performed by a third party of managers report to pass through valuation costs 89% of managers report to pass through tax costs Key findings from the 2019 Global Private Equity Survey 24

26 Contacts Global Andres Saenz Global Private Equity Leader Ernst & Young LLP Michael Lee Global Wealth & Asset Management Markets Leader Ernst & Young LLP Jeffrey Hecht Global Private Equity Tax Leader, Americas Ernst & Young LLP Americas William Stoffel Americas Private Equity Leader Ernst & Young LLP Mike LoParrino FSO Private Equity Leader Ernst & Young LLP Chris Le Roy Northeast Private Equity Leader Ernst & Young LLP Americas (continued) Mark Olsen US West Private Equity Leader Ernst & Young LLP Cliff Cammock Partner, Ernst & Young LLP (West) Petter Wendel FSO Private Equity Tax Leader Ernst & Young LLP Shawn Pride Principal, Ernst & Young LLP Kyle Burrell Partner, Ernst & Young LLP (New England) Rebecca Borden Partner, Ernst & Young LLP (New England) John Kavanaugh Partner, Ernst & Young LLP (Midwest) Key findings from the 2019 Global Private Equity Survey

27 Contacts Americas (continued) Andy York Partner, Ernst & Young LLP (Southeast) Matthew Koenig Partner, Ernst & Young LLP (Central) EMEIA John van Rossen Private Equity Leader Ernst & Young LLP Ashley Coups Partner, Ernst & Young LLP Caspar Noble Partner, Ernst & Young LLP Olivier Coekelbergs Partner, Ernst & Young S.A olivier.coekelbergs@lu.ey.com Asia-Pacific Christine Lin Partner, Ernst & Young christine.lin@hk.ey.com Brian Thung Partner, Ernst & Young LLP brian.thung@sg.ey.com For the complete survey findings, go to ey.com/pesurvey Global Private Equity Survey Key findings from the 2019 Global Private Equity Survey 26

28 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. EY is a leader in serving the global financial services marketplace Nearly 51,000 EY financial services professionals around the world provide integrated assurance, tax, transaction and advisory services to our asset management, banking, capital markets and insurance clients. In the Americas, EY is the only public accounting organization with a separate business unit dedicated to the financial services marketplace. Created in 2000, the Americas Financial Services Organization today includes more than 11,000 professionals at member firms in over 50 locations throughout the US, the Caribbean and Latin America. EY professionals in our financial services practices worldwide align with key global industry groups, including EY s Global Wealth & Asset Management Center, Global Banking & Capital Markets Center, Global Insurance Center and Global Private Equity Center, which act as hubs for sharing industryfocused knowledge on current and emerging trends and regulations in order to help our clients address key issues. Our practitioners span many disciplines and provide a well-rounded understanding of business issues and challenges, as well as integrated services to our clients. With a global presence and industry-focused advice, EY s financial services professionals provide high-quality assurance, tax, transaction and advisory services, including operations, process improvement, risk and technology, to financial services companies worldwide EYGM Limited. All Rights Reserved. EYG no Gbl BDFSO ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice. ey.com