baxon breakfast seminar: ‘navigating in uncertain times: an outlook on h1 private equity...

46

Upload: baxon-solutions

Post on 13-Apr-2017

737 views

Category:

Data & Analytics


0 download

TRANSCRIPT

Page 2: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Global Private Equity Outlook – April 2016

Navigating in Uncertain Times – Challenges and Opportunities

London, 28th April 2016

Page 3: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

• The long term picture

• Q1 2016 - turbulent times

• A word about Private Debt

• Challenges and Opportunities for GPs and LPs

Operational Excellence & Transparency

Page 4: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

• Private Equity:

o Buyout, Venture, Growth, Turnaround, Secondaries, Fund of Funds, Other ‘core’ PE

• Private Capital:

o PE + Private Debt + Private Real Estate + Infrastructure + Natural Resources

Definitions

Page 5: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

“Follow The Money” – LPs’ PE Return Expectations

Source: Preqin 2016 H1 Investor Outlook

Page 6: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Private Capital Returns – PrEQIn Index 2000 - 2015

Source: Preqin 2016 Global PE & VC Report

Page 7: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Private Capital Returns – PrEQIn Index 2000 - 2015

Source: Preqin 2016 Global PE & VC Report

+ / - 400 BP p.a.

Page 8: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Returns by Asset Class – Pension Funds

Source: Preqin 2016 Global PE & VC Report; median returns for pension funds by asset class

Page 9: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Returns by Asset Class – Pension Funds

Source: Preqin 2016 Global PE & VC Report; median returns for pension funds by asset class

+ / - 400 BP p.a.

Page 10: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

LP Satisfaction with PE Returns

Source: Preqin Investor Outlook H1 2016

Page 11: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Long Term Allocation Intentions

Source: Preqin Investor Outlook H1 2016

Page 12: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Private Capital AUM, 2000 - 2015

Source: Preqin 2016 Global PE & VC Report

Page 13: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

LPs Below / On / Above Target PE Allocation

Source: Preqin 2016 Global PE & VC Report

Page 14: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Private Capital Calls & Distributions, 2000 – 2015

Source: Preqin 2016 Global PE & VC Report; 2015 is estimate based on H1 annualized

Page 15: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Private Capital – Net Cash Flows for LPs, $bn

Source: Preqin Asia PE Report November 2015; Preqin PE Online

‘Net Call’

‘Net Dist’

Page 16: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

LPs’ Expected Commitments 2016 vs. 2015

Source: Preqin Investor Outlook H1 2016

Page 17: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Global Private Capital Fundraising – Final + Interim Closes Qly

Source: Preqin 2016 Global PE & VC Report

Page 18: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Global Private Equity Fundraising – Final + Interim Closes Qly

Source: Preqin 2016 Q1 PE Quarterly

Page 19: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Private Equity Funds on Road

Source: Preqin 2016 Q1 PE Quarterly

Page 20: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Global Buyout & Growth Deals, 2006 - 2016

Source: Preqin Buyout Deals Analyst

Page 21: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Global Buyout & Growth Deals, 2006 - 2016

Source: Preqin Buyout Deals Analyst

Page 22: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

What Has Changed? – Market Volatility and Credit Spreads

Source: St Louis Federal Reserve - US High Yield B Option-Adjusted Spread

Page 23: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Global Buyout Deal Value vs. US Credit Spreads, 2006 – 2016Q1

Source: Preqin deals data; Fed Reserve credit spread data (BofA Merrill Lynch US High Yield B Option-Adjusted Spread)

Page 24: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Where Are We Now?

Source: St Louis Federal Reserve - US High Yield B Option-Adjusted Spread

Page 25: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

How Well-Positioned is PE to Weather A Potential Storm?

Page 26: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

1: Reasonable Discipline Post-GFC

Source: Preqin Performance Analyst database

Page 27: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

2: Performance of PE During / Post GFC

Source: Preqin Performance Analyst database

Page 28: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

2: Performance of PE During / Post GFC

Source: Preqin Performance Analyst database

Page 29: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Fundraising Outlook - 2016

Negative Factors

• Reluctance to commit at time of uncertainty

• Evidence of stabilizing appetite during 2015?

Positive Factors

• PE’s track record• PE Relatively well-

positioned• Commit now to

invest at lower valuations?

Page 30: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Fundraising Outlook - 2016

Negative Factors

• Reluctance to commit at time of uncertainty

• Evidence of weakening appetite during 2015?

Positive Factors

• PE’s track record• PE Relatively well-

positioned• Commit now to

invest at lower valuations

• 2016 will probably prove to be an OK / Good vintage • But, suspect it’s likely to be a tougher year for fundraising

Page 31: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

To summarise… We have seen a difference in the expected LP commitments versus what has really

been happening in Q1 2016

PE has been significantly more active in paying cash out to LPs than in the run-up to the GFC

And has also been significantly more cautious in calling money up for new investments . . .

So the aggregate portfolio is significantly more mature than at the time of the start of the GFC

Hence we can expect it to be correspondingly more robust

Page 32: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Private Debt

Page 33: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Global Private Debt Fundraising by Year

Vintage Year

Number of Funds

Aggregate Capital Raised

(bn)

Average Fund Size

(mn)

Q1 2016 15 $7.8 $589

2015 134 $89.5 $728

2014 137 $76.0 $608

2013 157 $81.1 $555

2012 104 $63.4 $661

2011 96 $46.2 $531

2010 89 $40.9 $499

Global Private Debt Fund Raising by Year

rflanders
Continued growth in private debt over the last five years. Off to a slow start in 2016... A result of high dry powder? Low M & A?
Page 34: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

European Private Debt Fundraising by Year

Vintage Year

Number of Funds

Aggregate Capital Raised

(bn)

Average Fund Size

(mn)

Q1 2016 4 $4.1 $1377

2015 34 $30.9 $997

2014 46 $24.5 $544

2013 39 $19.7 $548

2012 26 $18.2 $727

2011 18 $12.6 $701

2010 17 $6.0 $397

European Private Debt Fundraising by Year

Page 35: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Europe Focused Direct Lending– Fundraising by Year

Vintage Year

Number of Funds

Aggregate Capital Raised

(bn)

Average Fund Size

(mn)

Q1 2016 2 $1.1 -

2015 16 $18.8 $1346

2014 17 $13.2 $778

2013 15 $8.5 $610

2012 6 $3.5 $584

2011 2 $1.1 $550

2010 5 $2.9 $716

Europe Focused Direct Lending Fundraising by Year

rflanders
Direct lending has been the main driver for growth within European private debt. Again Q1 is below pace for prior years, also a result of high dry powder?
Page 36: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Challenges & Opportunities

Page 37: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Private Equity Funds on Road

Source: Preqin 2016 Q1 PE Quarterly

Page 38: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Challenges & Opportunities for GPs- 1: Competition

Source: Preqin LP Survey Q1 2016

Page 39: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Challenges & Opportunities for GPs- 2: Factors of Importance to LPs1

Source: Preqin LP Survey Q1 2016

(1) “Which of the following characteristics are most important in identifying a superior fund manager?”

Page 40: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Challenges & Opportunities for GPs- 2: Factors of Importance to LPs1

Source: Preqin LP Survey Q1 2016

(1) “Which of the following characteristics are most important in identifying a superior fund manager?”

Page 41: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Challenges & Opportunities for GPs- 3: Operational Excellence

Source: Preqin LP Survey Q1 2016

(1) “Which are the most important features or areas of “operational excellence” in a firm?”

Page 42: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Challenges & Opportunities for GPs- 3: Operational Excellence

Source: Preqin LP Survey Q1 2016

(1) “Which are the most important features or areas of “operational excellence” in a firm?”

Page 43: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Key Takeaways

• Long term, excellent prospects for Private Equity, Private Debt and other Private Capital

• Turbulence / volatility means 2016 may well be tough, but funds will get raised

• LPs increasingly demanding on:• GP team quality• History of strong returns• Operational Excellence• Alignment of interest with GPs

• What can Baxon Solutions help you with?• Operational excellence . . . to help differentiate you in the eyes of your

current and prospective LPs• Deliver insights on how you have added value to portfolio companies• (And increase your control and cost-effectiveness)

Page 44: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Key Takeaways

• Long term, excellent prospects for Private Equity, Private Debt and other Private Capital

• Turbulence / volatility means 2016 may well be tough, but funds will get raised

• LPs increasingly demanding on:• GP team quality• History of strong returns• Operational Excellence• Alignment of interest with GPs

• What can Baxon Solutions help you with?• Operational excellence . . . to help differentiate you in the eyes of your

current and prospective LPs• Deliver insights on how you have added value to portfolio companies• (And increase your control and cost-effectiveness)

Actionable

Page 45: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Baxon contribution on Operational Excellence Better client service:

Faster response to LP queries Ability to provide data in LP preferred Excel templates with no additional effort

Data quality: Portfolio information traceable support by formal sign off process Golden source of data across all the organization

Compliance: Valuation frameworks, LP reports and ESG reporting continuously updated to meet

regulations and guidelines Timeliness:

Valuation process reduced to 2 weeks Monitoring process in 2-3 weeks

Risk assessment: Constant automatic aggregation of portfolio exposure Risk indicators and early warning alerts

More transparent, robust and efficient portfolio management

Page 46: Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

Thank You!

• Further information from Baxon Solutions

• Further information / reports available from Preqin