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.
01 Investor capital continues to pour into private equity firms, and CFOs seek new ways to support their businesses in scalable ways
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
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 2019 65% of CFOs expect the new fund will be larger than the last 3 Key findings from the 2019 Global Private Equity Survey
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
05 There is a cost to growing assets rapidly, causing margin erosion at many management companies
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
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
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
09 Technology might not be a quick fix, but private equity CFOs see the long-term benefit of a digital future
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
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
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
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
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
15 Private equity CFOs place diversity high on their agenda, prioritizing gender and cultural diversity, and also digital and analytics backgrounds
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
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
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
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
Talent management programs are quickly becoming a necessity Key findings from the 2019 Global Private Equity Survey 20
21 Often overlooked, outsourcing is a key competitive advantage for fighting margin compression
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
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
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
Contacts Global Andres Saenz Global Private Equity Leader Ernst & Young LLP +1 617 478 4619 andres.saenz@parthenon.ey.com Michael Lee Global Wealth & Asset Management Markets Leader Ernst & Young LLP +1 212 773 8940 michael.lee@ey.com Jeffrey Hecht Global Private Equity Tax Leader, Americas Ernst & Young LLP +1 212 773 2339 jeffrey.hecht@ey.com Americas William Stoffel Americas Private Equity Leader Ernst & Young LLP +1 212 773 3141 william.stoffel@ey.com Mike LoParrino FSO Private Equity Leader Ernst & Young LLP +1 212 773 2753 michael.loparrino@ey.com Chris Le Roy Northeast Private Equity Leader Ernst & Young LLP +1 212 773 5496 chris.leroy@ey.com Americas (continued) Mark Olsen US West Private Equity Leader Ernst & Young LLP +1 415 894 8348 mark.olsen@ey.com Cliff Cammock Partner, Ernst & Young LLP (West) +1 213 977 3068 cliff.cammock@ey.com Petter Wendel FSO Private Equity Tax Leader Ernst & Young LLP +1 201 551 5013 petter.wendel@ey.com Shawn Pride Principal, Ernst & Young LLP +1 212 773 6782 shawn.pride@ey.com Kyle Burrell Partner, Ernst & Young LLP (New England) +1 617 375 1331 kyle.burrell@ey.com Rebecca Borden Partner, Ernst & Young LLP (New England) +1 617 585 0775 rebecca.borden@ey.com John Kavanaugh Partner, Ernst & Young LLP (Midwest) +1 214 665 5274 john.kavanaugh@ey.com 25 Key findings from the 2019 Global Private Equity Survey
Contacts Americas (continued) Andy York Partner, Ernst & Young LLP (Southeast) +1 704 335 4265 andy.york@ey.com Matthew Koenig Partner, Ernst & Young LLP (Central) +1 312 879 3535 matthew.koenig@ey.com EMEIA John van Rossen Private Equity Leader Ernst & Young LLP +44 20 7951 6026 jvanrossen@uk.ey.com Ashley Coups Partner, Ernst & Young LLP +44 20 7951 3206 acoups@uk.ey.com Caspar Noble Partner, Ernst & Young LLP +44 20 7951 1620 cnoble@uk.ey.com Olivier Coekelbergs Partner, Ernst & Young S.A. +352 4 2124 8424 olivier.coekelbergs@lu.ey.com Asia-Pacific Christine Lin Partner, Ernst & Young +852 2846 9663 christine.lin@hk.ey.com Brian Thung Partner, Ernst & Young LLP +65 6309 6227 brian.thung@sg.ey.com For the complete survey findings, go to ey.com/pesurvey. 20 19 Global Private Equity Survey Key findings from the 2019 Global Private Equity Survey 26
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