Private Capital Market Update 2 nd Annual Asia-Pacific Fund Finance Symposium Christopher Elvin, Head of Private Equity 13 th June 218, Hong Kong
About Preqin Private Equity & Venture Capital Hedge Funds Real Estate Infrastructure Private Debt Natural Resources Data available via online databases, publicalons and research reports Clients include over 6, industry professionals from 16, firms San Francisco New York London Guangzhou Hong Kong Manila Singapore
Market Update
GLOBAL PRIVATE CAPITAL AUM AT A RECORD HIGH - $5.1TN AUM ($bn) 55 5 45 4 35 3 25 2 15 1 5 Global Private Capital AUM by Asset Class, Dec 21 to Sept 217 AUM ($bn) 1, APAC-Focused Private Capital AUM by Asset Class, Dec 21 to Sept 217 75 5 25 - Private Equity Real Estate Private Debt Infrastructure Private Equity Real Estate Private Debt Infrastructure
Stellar Fundraising ConXnues -$848bn Raised in 217, APAC- Focused Fundraising Reaches new Highs - $139bn Aggregate Capital Raised ($bn) 1 8 6 4 2 Global Private Capital Fundraising by Asset Class, 27 218 YTD 21 211 212 213 214 215 216 217 218 YTD Private Equity Real Estate Private Debt Infrastructure Natural Resources Aggregate Capital Raised ($bn) APAC-Focused Private Capital Fundraising by Asset Class, 27 218 YTD 25 2 15 1 5 21 211 212 213 214 215 216 217 218 YTD Private Equity Real Estate Private Debt Infrastructure Natural Resources
DistribuXons ConXnuing to Outstrip Call-Ups and Drive Fundraising Private Capital Calls & DistribuLons, 2 Sept 217 Capital Called/ Distributed ($bn) 12 1 8 6 4 2-2 -4 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Jan - Sept 217 Called Up DistribuLon Net Capital DistribuLon
Record Levels of Capital to Invest - $1.8tn Globally, $321bn focused on APAC 1,8 Global Private Capital Dry Powder, 21 Mar 218 35 APAC-Focused Private Capital Dry Powder, 21 Mar 218 1,6 3 1,4 Dry Powder ($bn) 1,2 1, 8 Dry Powder ($bn) 25 2 15 6 1 4 2 5 Dec-1 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Mar-18 Dec-1 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Mar-18 Private Equity Real Estate Private Debt Infrastructure Natural Resources Private Equity Real Estate Private Debt Infrastructure Natural Resources**
Challenging Deal Environment Remains APAC PE-Backed Buyout Deal AcXvity, 21-218 YTD No. of Deals 6 5 4 3 2 1 8. 7. 6. 5. 4. 3. 2. 1.. Aggregate Deal Value ($bn) No. of Deals Deal Value ($bn)
Challenging Deal Environment (cont) APAC Real Estate Deal AcXvity, 21-218 YTD APAC Infrastructure Deal AcXvity, 21-218 YTD No. of Deals 3 25 2 15 1 5 55. 45. 35. 25. 15. 5. -5. Aggregate Deal Value ($bn) No. of Deals 8 7 6 5 4 3 2 1 55 45 35 25 15 5-5 Aggregate Deal Value ($bn) No. of Deals Deal Value ($bn) No. of Deals Deal Value ($bn)
Ongoing Rise of VC in Asia APAC Venture Deal AcXvity, 21-218 YTD No. of Deals 6 5 4 3 2 1 55. 45. 35. 25. 15. 5. -5. Aggregate Deal Value ($bn) No. of Deals Deal Value ($bn)
12,5 AcXve InsXtuXonal Investors Globally
Changing LP Landscape Family Office Fund of Funds % of Capital Commibed to the Average Private Equity Fund Closed by Investor Type, 212-217 Make-up of Investors in Private Equity by LocaXon, 213 vs. 218 6% 5% 57% 53% Insurance Endowment Plan FoundaLon SuperannuaLon Government ProporLon of Investors 4% 3% 2% 1% 25% 25% 13% 9% 8% 9% Jan-13 Jan-18 Other % 5% 1% 15% 2% 25% 3% ProporLon of Capital Commided 212-214 215-217 % North America Europe Asia Rest of World Investor LocaLon
Challenges
Challenges Today Investor Views on the Key Issues in 218 Fund Manager Views on the Key Issues in 218 ValuaLons Fees Performance Deal Flow Market VolaLlity % 2% 4% 6% 8% 1% ValuaLons Performance Deal Flow Market VolaLlity Fee Pressure % 2% 4% 6% 8% 1% Natural Resources Infrastructure Private Debt Real Estate Natural Resources Infrastructure Private Debt Real Estate
LPs Views on Credit FaciliXes Perceived Benefits of Credit FaciliXes Cash flow management i.e. provide more regular, 59% Concerns Regarding Credit FaciliXes Fund performance comparability AddiLonal expense Liquidity risk 27% 42% 59% Reduce administralve burden i.e. prevent 47% Clawback issues 22% CompeLLve advantage to GPs i.e. ability to move 45% No concerns Tax consideralons 15% 14% No benefits 17% Legal risk 1% % 2% 4% 6% 8% 1% % 2% 4% 6% 8% 1%
Outlook
Record Number of Private Capital Funds in Market 1,82 ($36bn) Focused on APAC 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Private Capital Funds in Market, Jan 215 to Apr 218 2,235 793 2,651 2,965 946 1,8 3,484 3,869 1,263 1,379 Jan-15 Jan-16 Jan-17 Jan-18 Apr-18 6 5 4 3 2 1 APAC-Focused Private Capital Funds in Market by Type, June 218 59 63 274 164 7 6576 1 2 3511 1911 12 11 No. of Funds in Market Aggregate Capital Targeted ($bn) No. of Funds in Market Aggregate Capital Targeted ($bn)
Performance MeeXng LP ExpectaXons Median Public Pension Fund Net Returns by Asset Class (As at June 217) ProporLon of Respondents 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Investor Views on Porholio Performance Over the Past 12 Months RelaXve to ExpectaXons 26% 69% 5% 12% 6% 29% 22% 25% 25% 66% 68% 65% 12% 7% 1% 18% 61% 21% Fallen Short of ExpectaLons Met ExpectaLons Exceeded ExpectaLons
InsXtuXonal Plans for 218
InsXtuXonal Plans for Longer Term
Private Capital Fund Managers Confident in Finding Value Amount of Capital Fund Managers Plan to Deploy in 218 vs. 217 Private Equity Real Estate 66% 64% 27% 3% 7% 6% More Capital Infrastructure 74% 24% 2% Same Amount of Capital Private Debt 77% 2% 3% Less Capital Natural Resources 7% 29% 1% % 2% 4% 6% 8% 1%
Key Takeaways Global Private Capital in robust health: Ø Record AUM Ø Strong fundraising set to conlnue driven by net distribulons BUT. Ø Ø Ø Capital is becoming increasingly concentrated Challenging deal environment Clear concerns over high pricing & impact on future returns PosiXve Outlook: Ø GPs confident of finding value and looking to deploy more capital Ø LP expectalons being met & LPs remain commided & many looking to increase exposure