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US Market Insights

QUANTITATIVE PERSPECTIVES

Q3 2021

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PITCHBOOK QUANTITATIVE PERSPECTIVES2

COPYRIGHT © 2021 by PitchBook Data, Inc. All rights reserved. No part of this publication may be reproduced in any form or by any means—graphic, electronic, or mechanical, including photocopying, recording, taping, and information storage and retrieval systems—without the express written permission of PitchBook Data, Inc. Contents are based on information from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Nothing herein should be construed as any past, current or future recommendation to buy or sell any security or an offer to sell, or a solicitation of an offer to buy any security. This material does not purport to contain all of the information that a prospective investor may wish to consider and is not to be relied upon as such or used in substitution for the exercise of independent judgment.

Introduction

A forecast of surging private asset valuations and rocketing stock markets would have been bold back in March 2020, but as we approach two years of the COVID-19 crisis, many areas of financial markets could not look more buoyant. Enormous support from the Federal Reserve and fiscal stimulus from Congress to combat the knock-on effects of the pandemic have made for a multitude of interesting storylines. In our first iteration of Quantitative Perspectives: US Market Insights, we focused on fund cash flows—specifically trends that have been observed during the pandemic in private equity and venture capital.

Market Insights is a recurring report providing capital allocators, investment managers, and industry participants with a bird’s eye view of alternative markets through a macro lens. In each edition, PitchBook analysts provide key metrics that our research team tracks across private equity, venture capital, real estate, real assets, and debt markets. The report includes data on macroeconomics, public financial markets, private markets, demographics, and PitchBook’s proprietary quantitative research.

Zane Carmean, CFAQuantitative Research Analyst [email protected]

Q3 2021 US Market Insights

Published on September 29, 2021

[email protected]

mailto:[email protected]



Contents

The market landscape 4-16

Equity markets 17-34

Equity markets spotlight: Fund cash flows 35-43

Real estate 44-54

Real assets 55-61

Debt markets 62-68


The market landscape

PITCHBOOK QUANTITATIVE PERSPECTIVES

Key takeaways

5

• GDP growth forecasts for the US economy continue to show a full recovery back to the pre-pandemic trajectory by early 2022, though a close eye must be kept on COVID-19 variants.

• During the pandemic, consumer spending by category reversed some multidecade trends. Healthcare spending as a share of total household expenditures has fallen, along with restaurant spending, though the latter has rebounded with reopenings.

• The otherwise steady job gains slowed in August 2021, highlighted by continued weakness in retail trade. Logistics-related employment and professional/business services headline the net winners in the August jobs report.

• Driven by commodity price rises and logistics issues affecting the supply of a multitude of products including cars and apparel,inflation, as measured by the consumer price index (CPI), remains near 5%.

• The recent inflation readings have not yet translated to high Treasury rates; capital availability has compressed yields across PE, public equities, and corporate bonds.

• PE growth and VC funds have featured as the highest returners in private markets in 2020, driven by roaring stock markets andtechnology investments.

THE MARKET LANDSCAPE


The post-COVID-19 recovery so far has been swift, with GDP forecasts for 2021 and 2022 expecting the economy to return to its pre-pandemic trend.

Source: Bureau of Economic Analysis; WSJ Economic Forecasting Survey | Geography: US*As of June 30, 2021


Real GDP growth compared with post-global-financial-crisis (GFC) trend

$10.0

$12.0

$14.0

$16.0

$18.0

$20.0

$22.0

Real GDP ($T)* Post-GFC trend Next four-quarter forecast

33.8

%

7.0%

3.3%

-40%

-20%

0%

20%

40%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Annualized quarterly growth rate*



Consumer and business confidence rebounded quickly from the lows of March 2020, but the spread of the delta variant appears to have renewed consumer anxiety.

University of Michigan Consumer Sentiment Index*

Source: University of Michigan, OECD | Geography: US*As of August 31, 2021

OECD Business Confidence Index*

70.3

Median: 89.3

50

60

70

80

90

100

110

120

1990 1995 2000 2005 2010 2015 2020

101.5

Median: 99.9

95

96

97

98

99

100

101

102

103

1990 1995 2000 2005 2010 2015 2020



Employment has yet to fully recover as retail continues to be a laggard. However, transportation/warehousing-related employment has surged in the new economic environment.

Change in nonfarm employment*

Source: Bureau of Labor Statistics | Geography: US*As of August 31, 2021

August 2021 employment gains and losses (in thousands) by industry

0.2%

0.2%

-1.1

%

-13.

7%

2.2% 3.

6% 1.3%

1.1%

0.5%

0.5%

0.2%

-0.2

%

0.2% 0.4% 0.5%

0.2% 0.4% 0.7%

0.7%

0.2%

Jan 2020 Apr 2020 Jul 2020 Oct 2020 Jan 2021 Apr 2021 Jul 2021-28.5

-8.0

-3.0

-1.3

0.0

1.4

6.0

16.0

17.0

35.0

37.0

37.0

53.2

74.0

Retail trade

Government

Construction

Utilities

Leisure and hospitality

Wholesale trade

Mining and logging

Financial activities

Information

Education and health services

Manufacturing

Other services

Transportation and warehousing

Professional and business services


Long-term trends in consumer spending have reversed during the pandemic. Most notably, healthcare spending has been down as elective operations have been restricted.

Source: Bureau of Economic Analysis | Geography: US*As of June 30, 2021


Change in share of consumer expenditures of select categories*

-0.9%-0.2%-0.1%

+2.6%

-1.3%

+0.7%

-3%

-2%

-1%

0%

+1%

+2%

+3%

+4%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Vehicles Recreation Food at home Healthcare Transportation Restaurants



A handful of sectors have driven the inflation increase. Energy prices have spiked due to lockdowns, and supply chain issues have caused both new and used car prices to jump.

Consumer Price Index

Source: Bureau of Labor Statistics | Geography: US*As of August 31, 2021

Inflation by category in August 2021

5.3%

4.0%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021*

CPI Core CPI-2.5%

1.0%

1.2%

2.8%

3.7%

4.0%

4.2%

5.2%

5.3%

7.6%

7.7%

25.0%

Medical care commodities

Medical care services

Education and communication

Shelter

Food

Core CPI

Apparel

Electricity

CPI

New vehicles

Commodities less food and energy

Energy


The TIPS-implied (Treasury Inflation-Protected Securities) inflation rate remains subdued despite recent CPI readings. Still, real rates dipped negative in 2020 and have remained so into 2021.

Source: FRED | Geography: US*As of August 31, 2021


Ten-year Treasury rates versus real rates

1.3%

2.4%

-1.1%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*

Negative real yield 10-Year Treasury Break-even inflation Real rate



The hunt for yield continues to challenge allocators, and the yield curve remains flat by historical standards...

US pension plan return assumptions versus ten-year Treasury*

Source: FRED, National Association of State Retirement Administrators | Geography: US*As of August 31, 2021

Treasury market yield curve

5.2%

3.2%

1.3%

8.0%

7.0%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2006 2008 2010 2012 2014 2016 2018 2020

US 10-year Treasury Median US public pension plan return assumption

20 years prior

10 years prior

5 years prior

1 year prior

August 2021

0%

1%

2%

3%

4%

5%

6%

3 months 1 year 5 years 10 years 30 yearsBond maturity


Data definitions:

• S&P 500 earnings yield: the inverse of the trailing 12-month price-to-earnings multiple

• High-quality market corporate: the yield on high-quality market corporate bonds (“A” or higher ratings)

• ICE BofA high-yield corporate: the yield on high-yield (below investment-grade) corporate bonds as published by ICE and Bank of America

• Average PE EBITDA yield: the inverse of the trailing 12-month average EV/EBITDA multiple in buyout transactions

While each yield is not directly comparable, tracking valuations in terms common to the respective asset classes offers a useful exercise for relative allocation decisions.


...with lofty asset prices driving down yields across markets, thus making alternative assets more attractive...

Source: PitchBook, FRED, Robert Shiller | Geography: US*As of July 31, 2021

Yields on select asset classes*

8.0%

3.6%2.4%

4.1%

1.3%0%

5%

10%

15%

20%

25%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Average PE EBITDA yield S&P 500 earnings yield10-Year high-quality market corporate ICE BofA high-yield corporate10-Year Treasury


...but allocators must balance risk and reward. Historical returns offer an important starting point for an allocator evaluating the private markets.


Range of private, closed-end fund net IRRs by strategy (vintages 2002 to 2016)*

Source: PitchBook | Geography: US*As of December 31, 2020

25.3%

17.2% 16.2% 15.7%18.1%

20.9% 20.3%

33.1%31.5% 30.8%

32.4%

10.3%

4.1%

7.8% 8.2% 8.4%10.4% 10.7% 11.6% 12.5% 13.4% 13.5%

-1.7%

-9.8%-11.9%

1.0%

-4.6% -4.2%

4.3%

-8.9%

3.0%1.3%

-2.5%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Private capital Naturalresources

Infrastructure Private debt Real estateopportunistic

Real estatevalue-add

Funds of funds Venture capital Secondaries Buyout PE growth

Net

IRRs

Top and bottom quartile range Top decile Median IRR Bottom decile


Pooled one-year horizon IRRs: PE growth and VC continue to lead the way over the near term.



2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*15-year

horizon IRR*Real estate value-add

90.7%

Infrastructure44.1%

Natural resources

1.9%

Private debt24.9%

Secondaries22.3%

Secondaries18.4%

Private debt16.9%

Venture capital20.8%


Buyout14.3%

Natural resources

15.9%

Buyout19.5%

PE growth20.5%

PE growth17.3%

PE growth36.6%

PE growth14.1%

PE growth37.8%

Secondaries29.5%

Secondaries-7.6%

Buyout8.7%

Real estate opportunistic

19.9%


16.7%

Buyout14.8%

Buyout20.4%

Funds of funds17.3%

Real estate value-add

14.2%

Buyout14.1%

PE growth19.2%




Buyout12.6%

Secondaries33.1%


28.4%

Infrastructure-9.3%

PE growth4.7%

Buyout18.7%

Natural resources

16.7%


13.8%


19.2%

Infrastructure16.6%


PE growth11.0%

Secondaries16.5%

Funds of funds15.9%

Buyout15.3%

Buyout16.6%



30.2%

Buyout23.7%

Venture capital-11.3%

Natural resources

2.5%

Natural resources

18.2%


12.4%

Private capital13.2%


19.0%

Buyout15.9%


12.6%


11.0%


Secondaries15.8%

Secondaries13.8%

Funds of funds16.0%

Secondaries10.9%

Natural resources

29.0%


PE growth-12.8%

Private capital2.5%

Private debt17.1%


PE growth12.8%


PE growth15.2%

Secondaries11.9%


Infrastructure13.1%


13.7%

Funds of funds11.5%



Private debt25.2%

Funds of funds16.5%

Funds of funds

-14.5%

Funds of funds1.5%


PE growth11.3%

Secondaries11.8%

Private debt15.6%


14.9%

PE growth11.8%

Private debt9.9%

Funds of funds12.6%

Buyout11.1%


Infrastructure9.8%

Funds of funds10.6%


Natural resources

14.9%

Private capital-18.9%


PE growth16.8%

Private capital9.8%


10.7%

Funds of funds15.5%


Funds of funds11.1%


9.1%


11.9%



9.9%


3.0%

Private debt8.7%

Buyout24.4%

Private debt14.7%

Buyout-20.3%

Infrastructure-7.1%

Funds of funds13.8%

Buyout9.6%

Funds of funds10.0%

PE growth12.8%


14.8%


Infrastructure8.0%


11.1%

Infrastructure8.8%

Private debt7.7%

Secondaries2.3%


8.4%

Funds of funds22.4%



-21.8%

Secondaries-11.2%

Infrastructure11.4%

Funds of funds9.0%

Infrastructure7.5%

Natural resources

8.4%

Secondaries14.0%

Infrastructure9.8%

Funds of funds6.4%

Private debt10.8%

Private debt8.2%


5.2%

Private debt1.7%

Infrastructure7.3%

Infrastructure15.4%

PE growth1.5%


-25.7%


-40.1%


Infrastructure5.6%

Venture capital7.4%

Secondaries7.3%

Private debt8.5%

Private debt3.7%

Secondaries6.4%

Natural resources

10.7%


8.1%

Infrastructure2.4%


-0.8%


4.4%



-8.9%

Private debt-31.8%


-44.8%


-0.1%

Private debt4.2%

Natural resources

6.6%

Infrastructure1.3%

Natural resources

1.5%

Natural resources

-18.7%


Venture capital9.8%

Natural resources

5.4%

Natural resources

-9.4%

Natural resources

-17.8%

Natural resources

1.4%


The correlation matrix is calculated based on the quarterly returns of each asset class from Q1 2006 to Q1 2021 (see more details on quarterly returns in PitchBook’s Benchmarks report).

The quarterly return calculation:

(Ending NAV + Distributions –Contributions in quarter) ÷

(Beginning NAV)


A diversified portfolio requires data on strategy return correlations. One observation is the close connection between PE growth and VC.

Buyout PE growthReal estate

opportunisticReal estate value-add

InfrastructureVenture capital

Natural resources

Private debtFunds of

fundsSecondaries

Buyout 1.00

PE growth 0.79 1.00


0.51 0.39 1.00


0.30 0.39 0.45 1.00

Infrastructure 0.35 0.21 0.22 0.28 1.00

Venture capital

0.75 0.79 0.45 0.33 0.27 1.00

Natural resources

0.44 0.38 0.25 0.12 0.22 0.25 1.00

Private debt 0.71 0.62 0.27 0.22 0.19 0.46 0.48 1.00

Funds of funds

0.79 0.74 0.45 0.44 0.35 0.79 0.36 0.65 1.00

Secondaries 0.48 0.41 0.63 0.39 0.31 0.44 0.42 0.39 0.58 1.00

Source: PitchBook | Geography: US*As of March 31, 2021

Correlation matrix of quarterly returns (Q1 2006 to Q1 2021 preliminary results)*

https://pitchbook.com/news/reports/2021-pitchbook-benchmarks-as-of-q4-2020


Equity markets


Key takeaways

18

• Capital raising for buyout and PE growth funds cooled off slightly from the peak in 2019, while venture funds had the strongest year on record in 2020 and are tracking similarly in 2021.

• Meanwhile, mega-deal activity in buyout, PE growth, and VC has rebounded from early-2020 lows. PE growth and venture have registered several monthly highs in total volume for mega-transactions.

• Venture deal activity has continued to feed off the record dry powder, leading to total VC fund assets hitting an all-time high of $471.7 billion at the end of 2020.

• The high degree of capital availability has also created the most startup-friendly investing environment of the past 15+ years, as measured by PitchBook’s VC Dealmaking Indicator.

• The US unicorn factory continues to churn out more of these no-longer-rare beasts: nearly one per day on average for the last year.

• The macro environment in 2021 has been moderately positive for private equity, as indicated by PitchBook’s PE Barometer.

• The climb of EV/EBITDA buyout multiples resumed after a lull in early 2020, though the relative attractiveness of buyout deals compared with high-yield corporate bonds and S&P 500 earnings yields is within norms.

• Trends in sustainable investing have translated to institutional capital funneling into 4- and 5-star rated public US mutual funds and private impact funds.

EQUITY MARKETS

https://pitchbook.com/news/reports/q3-2021-pitchbook-analyst-note-introducing-the-vc-dealmaking-indicator

https://pitchbook.com/news/articles/the-pitchbook-pe-barometer


EQUITY MARKETS

Fund counts in buyout, PE growth, and venture have ticked down during the pandemic, though total capital raised remains near or at historically high levels.

Capital raised ($B) by select strategies

Source: PitchBook | Geography: US*As of June 30, 2021

Funds closed (#) by select strategies

$0

$50

$100

$150

$200

$250

$300

$350

$400

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

*

VC Buyout PE growth

0

200

400

600

800

1,000

1,200

1,400

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

*

VC Debt PE growth


Mega-buyout deals slowed early in the pandemic but have quickly regained momentum during the recovery...

Source: PitchBook | Geography: US*As of August 31, 2021

EQUITY MARKETS

Mega buyout deal ($500 million+ deal size) activity by month

0

5

10

15

20

25

$0

$10

$20

$30

$40

$50

2017 2018 2019 2020 2021*

Deal value ($B) Deal count


...and mega PE growth deals are showing a similar uptick in activity…


EQUITY MARKETS

Mega PE growth deal ($100 million+ deal size) activity by month

0

2

4

6

8

10

12

14

16

18

20

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

2017 2018 2019 2020 2021*



…along with startup mega-deals, with venture consistently seeing near-record volumes.


EQUITY MARKETS

Mega VC deal ($100 million+ deal size) activity by month

0

10

20

30

40

50

60

70

80

90

$0

$5

$10

$15

$20

$25

2017 2018 2019 2020 2021*



EQUITY MARKETS

VC, PE growth, and buyout fund dry powder are at record levels. Venture specifically had $155.6 billion at the ready at the end of 2020 and more than $470 billion in fund portfolio assets.

Dry powder ($B) by strategy


Venture capital dry powder and NAV ($B)

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

*

VC Buyout PE growth

$76.

8

$78.

8

$86.

0

$87.

2

$79.

4

$74.

3

$71.

5

$68.

1

$65.

2

$71.

4

$82.

0

$98.

1

$100

.3

$127

.1

$141

.8

$155

.6

$93.

9

$116

.0

$137

.2

$133

.1

$142

.7

$160

.2

$178

.3

$181

.7

$198

.9

$219

.9

$246

.3

$251

.8

$267

.9 $330

.5 $390

.2

$471

.7

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

*

Dry powder Fund NAV


Record fundraising and the entrance of nontraditional investors has led to a market that is highly favorable to startups.


EQUITY MARKETS

PitchBook VC Dealmaking Indicator*

A full breakdown of the methodology and analysis

can be found in our VC Dealmaking Indicator report.

35.0

37.1

Overall median: 71.2

20

30

40

50

60

70

80

90

100

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Early-stage VC Late-stage VC

More VC-investor friendly

More startup friendly

https://pitchbook.com/news/reports/q3-2021-pitchbook-analyst-note-introducing-the-vc-dealmaking-indicator


EQUITY MARKETS

Deal term trends have also favored startups, with redemption rights waning, and the average percentage acquired by VC investors has declined despite rising deal sizes.

Share of VC deals with redemption rights negotiated by series*


Average ownership VCs acquired by series*

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Seed Series A Series B Series C Series D

0%

5%

10%

15%

20%

25%

30%

35%

40%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Seed Series A Series B Series C Series D


A full breakdown of the analysis on returns by series can be found in our recently published report. The analysis presented is our third iteration of the topic. To enable richer analysis of these companies’ incoming and outgoing capital, we added the ability to assess the success or failure of startups in terms of capital rather than by company counts. Analyzing solely by the number of companies obscured the measure of scale via deal sizes in VC investing.

EQUITY MARKETS

Early-stage venture offers the biggest home-run potential, despite higher failure rates. Within verticals, the differences are even starker.


Returns by series and company vertical*

34.3

%

32.7

%

17.8

%

18.5

%

32.9

%

21.3

%

15.4

%

17.0

%

27.2

%

18.8

%

16.7

%

21.0

%

27.1

%

18.2

%

12.3

%

16.3

%

27.0

%

17.8

%

13.9

%

13.1

%

26.7%

17.7%15.2%

19.4%

Series A Series B Series C Series D

Fintech Pharma & biotech Tech Software Life sciences All

https://pitchbook.com/news/reports/q3-2021-pitchbook-analyst-note-vc-returns-by-series-part-iii


EQUITY MARKETS

Unicorns are no longer a rarity in the US, with aggregate valuations at $1.5 trillion and 25 to 30 unicorns minted per month on average over the last year.

Unicorn creation rate and monthly change (#)

Source: PitchBook | Geography: US*As of September 7, 2021

Note: Fallen unicorns are companies with a valuation that fell below $1.0 billion.

Unicorn aggregate valuations ($T)

-30

-20

-10

0

10

20

30

40

50

-300

-200

-100

0

100

200

300

400

500

2009 2011 2013 2015 2017 2019 2021*

Monthly changeTo

tal u

nico

rns

Total exited/fallen Active unicorns Exited/fallen Unicorn born

$0.6(2019 year-end)

$1.5

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

2009 2011 2013 2015 2017 2019 2021*


EQUITY MARKETS

While the count of publicly listed companies has declined, PE- and VC-backed companies have exploded over the past two decades.

Growth of PE-backed companies versus public companies*

Source: PitchBook, World Bank | Geography: US*Publicly listed and PE-backed company counts as of December 31, 2019; market cap and fund NAV through December 31, 2020

Growth in fund NAV for VC and PE outpacing public market cap*

4,266

8,689

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Publicly listed PE-backed

269.6

779.9

412.6

0

100

200

300

400

500

600

700

800

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Reba

sed

to 1

00 in

200

0

Public company market cap Private equity fund NAV VC fund NAV


Our PE Barometer is a factor-based framework that estimates the strength of the current return environment based on key economic and market indicators. The table shows each indicator included in the model and its contribution to the current barometer score, which is a product of the beta and current standardized value.

The current score of 0.23 is moderately positive, primarily driven by low readings on the Financial Stress Index and high-yield spreads and high readings on the Chicago Fed’s National Activity and the Business Confidence Indexes.

For more information, please see our full breakdown and methodology available on the PitchBook website.

EQUITY MARKETS

PitchBook PE Barometer*

Source: PitchBook, FRED | Geography: US *As of July 31, 2021

Despite ongoing uncertainty due to the pandemic, our PE Barometer shows a moderately positive environment for private equity...

Ind

icat

or

cate

go

ry

Indic ator Signal Beta Value Contribution

National Activity Index Level 0.60 x 0.12 = +0.07National Activity Index Trend 0.41 x 0.10 = +0.04Consumer Confidence Level -0.22 x 0.02 = -0.00Consumer Confidence Trend -0.68 x 0.03 = -0.02Business Confidence Level 1.30 x 0.05 = +0.07Business Confidence Trend -0.78 x 0.07 = -0.06

High-yield spreads Level -0.87 x -0.06 = +0.05High-yield spreads Trend -0.03 x -0.10 = +0.00Lending standards Level -0.81 x -0.03 = +0.02

Financial Strees Index Level -0.85 x -0.09 = +0.08Financial Strees Index Trend -0.04 x -0.12 = +0.01

Implied equity vol Level -0.24 x -0.08 = +0.02Implied equity vol Trend 0.03 x -0.12 = -0.00Small cap equity Trend -0.35 x 0.11 = -0.04

+0.23

4.97%

Mac

roC

red

itEq

uit

y

Impl ied quarterly return

PE Barometer Sc ore July 2021

https://pitchbook.com/news/articles/the-pitchbook-pe-barometer


The full period R2 between the Barometer and quarterly PE return of 0.51 indicates that economic and market factors explain most of the variation in historical PE returns and that PE has significant exposure to the risk factors that are common across most asset classes. This has important implications for multi-asset portfolio construction and risk management because overall risk tends to be concentrated in these factors in traditional allocations.

EQUITY MARKETS

PitchBook PE Barometer score and PE fund returns by quarter*

Source: PitchBook, FRED | Geography: US*PE Barometer as of July 2021; normalized PE return as of December 31, 2020

...having recorded positive values since mid-2020.

July 2021: 0.23

-4

-3

-2

-1

0

1

2

3

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

PE Barometer Normalized PE return

R2 = 0.51


Rising multiples on buyout deals have persisted since the GFC but reversed course after the onset of the pandemic. 2021 has seen multiples rise again, likely related to the availability of capital.


EQUITY MARKETS

Rolling 12-month average EV/EBITDA multiple for buyout transactions

14.3x

12.7x

0x

2x

4x

6x

8x

10x

12x

14x

16x

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*


Despite the increasing multiples in buyout deals, relative valuations are within the last decade’s norms when compared to the S&P 500 earnings yield and high-yield corporate bond rates.

Source: PitchBook, FRED, Robert Shiller | Geography: US*As of August 31, 2021

EQUITY MARKETS

Average EV/EBITDA yield spread to S&P 500 earnings yield and high-yield corporate bond rates*

The spreads are calculated against the inverse of the 12-

month average buyout EV/EBITDA multiple plotted

on the previous page.

4.3%3.8%

-5%

0%

5%

10%

15%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Spread to S&P 500 earnings yield Spread to HY corporate bond rates


EQUITY MARKETS

Environmental, social, and governance (ESG) investing has grown, but only 4- and 5-star-rated mutual funds have positive net flows since 2017, while $26.1 billion has been raised in impact funds.

Institutional net flows ($B) into all mutual funds by Morningstar Sustainability star ratings*

Source: PitchBook, Morningstar, Global Impact Investing Network | Geography: US*As of June 30, 2021

Private, closed-end impact fundraising activity*

$541.8

$341.1

-$49.7

-$128.8

-$31.6

-$200

-$100

$0

$100

$200

$300

$400

$500

$600

2017 2018 2019 20205-star 4-star 3-star 2-star 1-star

13

6

9

31

87

8

23

15

76

15

75

$26.1

$0

$5

$10

$15

$20

$25

$30

Dec 2017 Dec 2018 Dec 2019 Dec 2020

New funds Cumulative fundraising ($B)


Institutional investor assets in actively managed, 5-star funds still outweigh private impact fund investment, but both have been steadily rising over the last decade.

Source: PitchBook, Morningstar, Global Impact Investing Network | Geography: US*As of December 31, 2020

EQUITY MARKETS

Institutional assets under management ($B) in 5-star Sustainability, actively managed mutual funds versus private impact funds

Interested readers can find more information on ESG

investment practices in our recently released

Sustainable Investor Survey.

$74.

2 $97.

7 $128

.3

$142

.7

$127

.4

$140

.5

$186

.3

$177

.6

$227

.2

$289

.2

$26.

4

$28.

1

$37.

3

$48.

8

$52.

3

$65.

3

$67.

3

$73.

7

$78.

4

$81.

2

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*

5-star mutual funds Private impact funds

https://pitchbook.com/news/reports/2021-sustainable-investment-survey


Equity markets spotlight: Fund cash flows


Key takeaways

36

• Capital calls made by buyout and venture fund GPs to their LPs took a dip in early 2020 as the pandemic hit, hitting a multiyearlow average contribution as a percentage of fund size of 3.8% and 3.7%, respectively. By the end of 2020, though, average capital called reached a multiyear high of 5.5% for both fund strategies.

• The increased capital calls have been in response to a surprisingly buoyant market for deal and exit activity. Both buyout and venture funds saw average distributions rebound to well above historical medians by year-end 2020.

• The breadth of winners is evidenced by the multiyear highs in the proportion of buyout and venture funds that made a distribution in Q4 2020 as the recovery was fully underway.

• Both strategies registered rebounds in total capital distributed back to LPs in 2020 over 2019, with venture funds hitting an all-time high in net realizations of $71.7 billion.

EQUITY MARKETS SPOTLIGHT: FUND CASH FLOWS


As in prior recessions, buyout fund capital calls dipped as GPs took stock of the economic climate, but the rebound in deployment by year-end 2020 was strong and swift.



Average capital calls for buyout funds (funds five years old or younger) by quarter

3.8%

5.5%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*

Perc

enta

ge o

f fun

d siz

e

Average capital called Median 2000 to 2020


Venture capital also briefly reduced deployment in early-to-mid-2020 before rebounding to well above the historical median capital call.



Average capital calls for venture funds (funds five years old or younger) by quarter

3.7%

5.5%

0%

1%

2%

3%

4%

5%

6%

7%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*

Perc

enta

ge o

f fun

d siz

e

Average capital called Median 2001 to 2020


On the reverse side of the ledger, LPs saw average distributions rebound to decade-plus highs by Q4 2020. The exit and dealmaking environment has proven to be surprisingly spry…



Average distributions to LPs by buyout funds (funds 4 to 8 years old and 8 to 12 years old) by quarter

1.9%

9.4%

3.0%

6.7%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*

Perc

enta

ge o

f fun

d siz

e

Age 4-8 years Age 8-12 years Overall median 2000 to 2020


...which has also benefited venture funds and led to near-highs in average distribution rates, effectively bolstering the upward trend since the GFC.



Average distributions to LPs by venture funds (funds 4 to 8 years old and 8 to 12 years old) by quarter

1.2%

8.1%

2.3%

7.9%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*

Perc

enta

ge o

f fun

d siz

e

Age 4-8 years Age 8-12 years Median 2001 to 2020


Not only did average distributions to LPs rise, but Q4 2020 also saw a sharp rebound in the percentage of buyout funds that made a distribution, suggesting there is breadth to the winners...



Share of buyout funds aged 4 to 8 years with a distribution

47.9%

67.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*


...and once again, venture funds followed suit by hitting a decade-plus high in Q4 2020 in the percentage of funds that made a distribution.



Share of venture funds aged 4 to 8 years with a distribution

27.5%

35.7%

50.0%

0%

10%

20%

30%

40%

50%

60%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*



Buyout fund distributions rebounded in 2020 after a lull in 2019, and VC shattered previous records. The $71.7 billion distributed was nearly 60% more than the previous five-year average.

Distributions ($B) to LPs by buyout funds


Distributions ($B) to LPs by VC funds

$84.

0 $106

.4

$146

.0

$166

.6 $1

91.7

$203

.3

$181

.4 $2

12.7

$223

.2

$181

.5

$220

.2

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*

$20.

6

$24.

7 $32.

5

$35.

8 $44.

6

$55.

1

$33.

8

$48.

7

$47.

1

$43.

8

$71.

7

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020*


Real estate


Key takeaways

45

• Disruption in the real estate market has been particularly stark during the pandemic. Fundraising in the space has fallen back as LPs evaluate the new normal around e-commerce, work-from-home, and technology adoption.

• Even with the fall in fundraising and dry powder, real estate debt fund assets continue to grow, highlighting the maturation of nontraditional lenders in the space.

• Results from the most recent Senior Loan Officer Survey show banks loosening credit standards on real estate loans across all three lending categories—commercial, multifamily, and construction—for the first time since 2014.

• Returns in public and private property markets have reflected the new economy accelerated by the pandemic. Industrial real estate and storage facilities have seen strong returns compared with the broader indexes.

• The housing market is another closely followed trend, with housing starts as a proportion of regional populations lagging historical rates, leading to the huge gains in home values in the Sun Belt and West Coast markets.

• Driven largely by VC-fueled growth, San Francisco is one market to closely monitor. Although deal value hasn’t shrunk during thepandemic, the metropolitan statistical area (MSA) has lost 8.6% of its share of deal value in the US.

REAL ESTATE

https://www.federalreserve.gov/data/sloos.htm


REAL ESTATE

The real estate market has been one of the most disrupted by the pandemic. The effects have spilled into fundraising as 2020 saw a six-year low in capital closed and a 10-year low in vehicles.

Real estate capital raised ($B) by strategy


Real estate funds closed (#) by strategy

$0

$20

$40

$60

$80

$100

$120

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

*

Debt Core/Core+ Opportunistic Value-add Distressed

0

50

100

150

200

250

300

350

400

450

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

*



REAL ESTATE

The drop in fundraising led to a dip in dry powder available to GPs. Even the hot debt fund strategy saw a dip for the first time since 2015, though fund assets (NAV) hit all-time highs.

Real estate dry powder ($B) by strategy


Real estate debt dry powder and NAV ($B)

$0

$50

$100

$150

$200

$250

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

*


$7.1

$5.8

$6.6

$11.

6

$19.

2

$20.

7

$17.

1

$13.

1

$16.

6

$23.

1

$22.

4

$22.

4

$35.

8

$41.

5

$43.

0

$34.

2$6.0 $9

.4

$14.

8

$12.

7 $17.

5

$25.

4 $29.

3

$32.

9

$33.

0

$36.

0

$36.

8

$38.

2

$38.

7

$48.

1

$49.

1

$58.

3

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

*

Dry powder Fund NAV


Debt funds have been supplanting traditional bank lending since the GFC. However, banks loosened standards across the three lending categories for the first time since 2014.

Source: Federal Reserve Senior Loan Officer Survey | Geography: US*As of June 30, 2021

**Original real estate series was broken out starting in 2013

REAL ESTATE

Net percentage of banks tightening standards on real estate loans

-20%

0%

20%

40%

60%

80%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*

Commercial Multifamily Real estate** Construction


REAL ESTATE

Commercial mortgage-backed securities (CMBS) delinquency rates help identify stress. Office tenants are paying rent for now, while industrial is strong. Retail and lodging remain problems...

CMBS delinquency rate*

Source: Trepp | Geography: US*As of August 31, 2021

CMBS delinquency rate by property type*

2.3%

10.3%

5.6%

0%

2%

4%

6%

8%

10%

12%

Dec 2019 Jun 2020 Dec 2020 Jun 2021

1.2% 2.

3% 3.0%

14.9

%

23.0

%

0.9% 2.

0% 2.3%

11.8

%

16.4

%

0.6% 2.

1%

2.2%

10.4

% 12.1

%

Industrial Office Multi-family

Retail Lodging

August 2020 February 2021 August 2021


…and those trends have tracked in public real estate investment trust (REIT) returns. Industrial has seen incredible growth with the adoption of e-commerce to the detriment of retail.

Source: Nareit | Geography: US*As of August 31, 2021

REAL ESTATE

REIT index returns by property type*

171.9

105.5

337.3

116.3127.0

190.8

146.3

0

50

100

150

200

250

300

350

400

Dec 2015 Jun 2016 Dec 2016 Jun 2017 Dec 2017 Jun 2018 Dec 2018 Jun 2019 Dec 2019 Jun 2020 Dec 2020 Jun 2021

Reba

sed

to 1

00 in

201

5

Apartment Retail Industrial Lodging Office Self storage Healthcare


REAL ESTATE

A similar story has played out in private real estate markets: Industrial property prices have strongly outperformed the broader property market, which itself has rebounded since pre-COVID-19.

Total returns on commercial real estate

Source: Green Street | Geography: US*As of August 31, 2021

Green Street Price Index change by property type*

+0.7

% +2.5

%

+1.6

%

+1.4

%

+1.5

%

+1.6

%

+1.5

%

+2.1

%

-0.4

%

-9.2

%

+2.2

%

+3.2

%

+3.5

% +5.8

%

+9.5

%Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3*

2018 2019 2020 2021

Price return Income

-13%

-6%

-4%

2%

6%

8%

9%

13%

16%

31%

40%

41%

5%

3%

3%

3%

14%

6%

0%

5%

0%

5%

14%

17%

Mall

Office

Lodging

Healthcare

Strip retail

All property index

Student housing

Apartment

Net lease

Manufactured home

Self storage

Industrial

Pre-COVID-19 August 2021


REAL ESTATE

Attention on the housing market during the pandemic has been high. Decades of falling housing start rates led to shortages in many areas, though the rebound in starts from GFC lows continues.

Source: FRED, US Census | Geography: US*As of June 30, 2021

Housing starts as a share of population by region*

0.31%0.24%

0.64%

0.49%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Midwest Northeast South West


REAL ESTATE

Remote work options have driven housing prices in the Sun Belt, and VC money has turned more attention outside of the Bay Area to meet this new trend.

Annualized house price growth (April 2020 through June 2021)

Source: FRED, PitchBook | Geography: US*As of June 30, 2021; change in VC share is April 2018 through June 2019 versus April 2020 through June 2021

Note: City names represent their respective MSAs.

Change in share of VC deal value*

10.2%11.9%

13.2%13.4%

12.9%

13.6%

15.1%13.7%

15.3%

16.3%

16.3%16.5%

17.5%18.0%

25.1%

15.3%15.5%

16.3%

19.7%22.5%

20-City Composite: 15.4%

ChicagoMinneapolis

Washington, DCDetroit

ClevelandNew York

AtlantaBoston

Las VegasLos Angeles

PortlandMiami

San FranciscoDenver

CharlotteDallas

TampaSeattle

San DiegoPhoenix

West South/Mountain West Northeast Midwest

-0.0%

+0.1%

+0.2%

+1.0%

-0.9%

+0.3%

+1.9%

-0.2%-0.2%

+0.0%+0.0%

+0.1%+0.1%+0.1%

+0.2%

-8.6%

-0.2%

+0.3%

+1.8%+1.8%

San FranciscoNew York

PhoenixMiami

PortlandClevelandLas Vegas

TampaMinneapolis

AtlantaDallas

CharlotteDetroitDenver

Washington, DCSeattle

ChicagoSan Diego

Los AngelesBoston

West South/Mountain West Northeast Midwest


VC dealmaking can be a strong indicator of a market’s

propensity for job creation and wage growth—both

important variables for real estate demand.

REAL ESTATE

San Francisco is still the biggest VC market ($76.8 billion in deal value from April 2020 through June 2021), but it has lost on a relative basis to Los Angeles, Boston, San Diego, and other markets.

Change in share of VC deal value*

Source: PitchBook | Geography: US*As of June 30, 2021; change in VC share is April 2018 through June 2019 versus April 2020 through June 2021

Note: City names represent their respective MSAs.

San Francisco$76.8

New York$38.5

Phoenix$1.0

Miami$2.9Portland

$1.1

Dallas$1.8

Denver$3.3

Seattle$7.2

Chicago$6.6

San Diego$10.4

Los Angeles$26.4

Boston$28.3

-12%

-10%

-8%

-6%

-4%

-2%

0%

+2%

+4%

0% 5% 10% 15% 20% 25% 30% 35%

Change in share of VC deal value

Share of VC deal value (April 2020 through June 2021)

Bubble size = VC deal value ($B) April 2020 through June 2021


Real assets


Key takeaways

56

• Real assets fundraising has been a laggard in 2020 and 2021, though some of that trend is due to the market being dominated by a few large infrastructure funds making capital raising particularly lumpy.

• In the coming years, infrastructure will remain in focus. It continues to be a net winner within the asset class and could see aboon from the $3.5 trillion infrastructure package currently circling in Congress, if passed.

• Tech-focused infrastructure has been a multiyear outperformer, with publicly traded data centers and cell tower REITs outperforming timber REITs and oil & gas master limited partnerships (MLPs).

• Agricultural commodities, industrial metals, and oil & gas prices have rebounded from 2020 lows, potentially offering a reprieveto asset managers focused on those spaces.

• The impact investing trend has hit particularly close to real assets, with energy and agriculture being the most popular themes in private fundraising.

REAL ASSETS


REAL ASSETS

Real asset fundraising lagged in 2020, with capital raised falling by nearly half in 2020 from 2019, largely due to the lumpiness of infrastructure fundraising and oil & gas continuing to lose favor.

Real assets capital raised ($B) by strategy


Real assets fund closings (#) by strategy

$0

$10

$20

$30

$40

$50

$60

$70

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

*

Infrastructure Metals & mining Timber & agriculture Oil & gas Other

0

20

40

60

80

100

120

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

*



REAL ASSETS

Infrastructure fund managers are poised to take advantage of public-private partnerships if the $3.5 trillion infrastructure package passes through Congress.



Infrastructure fund dry powder and NAV ($B)

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

*


$26.

2

$33.

9

$29.

5

$36.

0

$32.

7

$33.

7

$40.

2

$60.

0

$70.

8

$55.

3

$65.

8

$101

.3

$93.

2

$93.

7

$2.7

$8.8 $1

5.0

$25.

6 $35.

0 $44.

1

$51.

7 $60.

6

$65.

7 $74.

2

$80.

0 $95.

9 $110

.1

$132

.3

$132

.4

$131

.7

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

*

Dry powder Fund NAV


Data center and cell-tower-dominated infrastructure REITs have seen an influx of capital as digitization of the economy intensifies.

Source: Nareit, Morningstar | Geography: US*As of August 31, 2021

Note: The infrastructure index is dominated by cell tower REITs.

REAL ASSETS

Real asset REIT and Alerian natural gas/oil pipeline MLP exchange traded fund (ETF) total returns*

55.6%

211.2%189.3%

-0.4%

-100%

-50%

0%

50%

100%

150%

200%

250%

2015 2016 2017 2018 2019 2020

Timber Data centers Infrastructure Alerian MLP


In early 2020, commodity price returns dipped into negative territory. The ensuing recovery has been met with rising consumer prices, with supply of many inputs failing to keep up with demand.

Source: Morningstar | Geography: US*As of August 31, 2021

REAL ASSETS

Select commodity price returns*

19.4%10.6%

36.5%

53.7%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

Dec 2019 Feb 2020 Apr 2020 Jun 2020 Aug 2020 Oct 2020 Dec 2020 Feb 2021 Apr 2021 Jun 2021 Aug 2021

Gold Brent oil GSCI Agriculture Copper


REAL ASSETS

We recently introduced impact tags to funds raising capital with a double bottom line. Funds focused on clean energy and agriculture have led the real asset impact fundraising.

Real asset impact-focused fund closings (#)

Source: PitchBook, Global Impact Investing Network | Geography: US*Fundraising as of June 30, 2021; fund NAV as of December 31, 2020

Real asset impact-focused fundraising and NAV ($B)

0

2

4

6

8

10

12

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*

Agriculture Energy Land Water

$1.2

$1.9

$0.6

$4.5

$10.

3

$2.7

$0.7

$4.8

$4.7

$3.6

$3.5

$0.4

$5.0 $6

.7 $7.8 $8

.7

$11.

1 $13.

0

$16.

3 $18.

2

$21.

4

$21.

9

$22.

1

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*

Total raised Fund NAV*

https://pitchbook.com/news/reports/q2-2020-pitchbook-analyst-note-the-double-bottom-line-private-market-impact-investment


Debt markets


Key takeaways

63

• Private debt fundraising had a small rebound in 2020 over 2019, though 2021 is on a slow pace through the first half of the year.

• Direct lending and special situations & distressed funds continue to be the most popular of the lending strategies in closed-endfunds, with the former hitting 20% higher fund NAV at the end of 2020 versus 2019.

• Traditional lenders reported the strongest net percentage of banks loosening of credit standards for small-to-large firms in at least two decades—a reflection of increasing capital available to borrowers.

• Following a brief trough in early 2020, average debt on PE buyout deals ticked up, coinciding with a downward reversal in high-yield bond rates over the same period.

• The relationship between high-yield bond rate movements and next-12-month debt percentage on buyout deals suggests that the current lows in high-yield corporates portend a continued rise in debt loads on PE transactions.

DEBT MARKETS


DEBT MARKETS

Debt funds continue to garner interest from investors looking for fixed-income exposure, with a higher yield opportunity that is attractive in the current rate environment.

Debt fund capital raised ($B) by strategy


Debt fund closings (#) by strategy

$0

$20

$40

$60

$80

$100

$120

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

*Direct lending Bridge financingSpecial situations & distressed Infrastructure & real estateVenture debt General

0

20

40

60

80

100

120

140

160

180

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

*

Direct lending Bridge financingSpecial situations & distressed Infrastructure & real estateVenture debt General


DEBT MARKETS

Debt fund dry powder remains near all-time highs, as direct lending is finding ways to supplant bank lending to midsized private companies…



Direct lending dry powder and NAV ($B)

$0

$50

$100

$150

$200

$250

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

*Direct lending Bridge financingSpecial situations & distressed Infrastructure & real estateVenture debt General

$7.7

$10.

3

$15.

6

$20.

7

$29.

9

$32.

6

$61.

6

$73.

6

$62.

0

$59.

1

$1.9

$2.3

$3.3

$3.8

$5.1 $8

.0 $10.

8 $18.

5

$25.

1 $36.

3 $45.

6 $53.

2 $62.

6

$82.

8

$100

.1

$120

.4

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

*

Dry powder Fund NAV


…and a 2020 spike in term requirements imposed by banks may have opened the door further to direct lending funds, but Q2 2021 saw a large net percentage of banks loosening standards.

Source: Federal Reserve Senior Loan Officer Survey | Geography: US*As of June 30, 2021

DEBT MARKETS

Net percentage of banks tightening standards on loans to small and mid-to-large firms

83.6%71.2%

-32.4%

74.5%70.0%

-25.7%-40%

-20%

0%

20%

40%

60%

80%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*

Mid-to-large firms Small firms


The debt percentage on buyout deals tracks loosely with rates on high-yield corporate bonds. With bond yields at all-time lows, debt on deals has been ticking up since March 2020.

Source: PitchBook, FRED | Geography: US*As of August 31, 2021

DEBT MARKETS

Average debt percentage on buyout deals compared with high-yield corporate bonds

49.8%

4.1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*

ICE BofAhigh-yield corporate

Aver

age

debt

per

cent

age

in b

uyou

t dea

ls

Average debt percentage ICE BofA high-yield corporate


DEBT MARKETS

Corporate yields can be an indicator for buyout debt levels. When yields move 250 basis points or more in a one-year period, it is often followed by a large move in buyout debt percent.

Change in high-yield corporate rate versus following 12-month change in average buyout debt percentage*

Source: PitchBook, FRED | Geography: US*As of August 31, 2021

Change in high-yield corporate rate of at least 250 basis points*

R² = 0.26

-15%

-10%

-5%

0%

+5%

+10%

+15%

-15% -10% -5% 0% +5% +10% +15%

Follo

win

g 12

-mon

th a

vera

ge d

ebt p

erce

ntag

e

Prior 12-month change in ICE BofA high-yield corporate

June 2009March 2020

R² = 0.66-15%

-10%

-5%

0%

+5%

+10%

+15%

-15% -10% -5% 0% +5% +10% +15%

Follo

win

g 12

-mon

th a

vera

ge d

ebt p

erce

ntag

e

Prior 12-month change in ICE BofA high-yield corporate

Additional research

PitchBook Benchmarks As of Q4 2020

Global Fund Performance ReportAs of Q4 2020

Private Fund Strategies ReportQ2 2021

US PE Middle Market ReportQ2 2021

US VC Valuations ReportQ2 2021

Global Private Debt ReportH1 2021

Global Real Estate ReportH2 2020

Real Assets ReportQ1 2021

Analyst Note: Introducing the VC Dealmaking IndicatorQ2 2021

Analyst Note: Private Equity BarometerQ1 2021

Analyst Note: VC Returns by Series: Part IIIQ3 2021

Sustainable Investment Survey2021

https://files.pitchbook.com/website/files/pdf/PitchBook_Benchmarks_as_of_Q4_2020_with_preliminary_Q1_2021_data_Global.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_Benchmarks_as_of_Q4_2020_with_preliminary_Q1_2021_data_Global.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_2021_Global_Fund_Performance_Report_as_of_Q4_2020_with_preliminary_Q1_2021_data.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_2021_Global_Fund_Performance_Report_as_of_Q4_2020_with_preliminary_Q1_2021_data.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_Q2_2021_Private_Fund_Strategies_Report.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_Q2_2021_Private_Fund_Strategies_Report.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_Q2_2021_US_PE_Middle_Market_Report.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_Q2_2021_US_PE_Middle_Market_Report.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_Q2_2021_US_VC_Valuations_Report.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_Q2_2021_US_VC_Valuations_Report.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_H1_2021_Global_Private_Debt_Report.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_H1_2021_Global_Private_Debt_Report.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_H2_2020_Global_Real_Estate_Report.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_H2_2020_Global_Real_Estate_Report.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_Q1_2021_Real_Assets_Report.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_Q1_2021_Real_Assets_Report.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_Analyst_Note_Introducing_the_VC_Dealmaking_Indicator.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_Analyst_Note_Introducing_the_VC_Dealmaking_Indicator.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_Q1_2021_Analyst_Note_Private_Equity_Barometer.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_Q1_2021_Analyst_Note_Private_Equity_Barometer.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_Analyst_Note_VC_Returns_by_Series_Part_III.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_Analyst_Note_VC_Returns_by_Series_Part_III.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_2021_Sustainable_Investment_Survey.pdf#page=1

https://files.pitchbook.com/website/files/pdf/PitchBook_2021_Sustainable_Investment_Survey.pdf#page=1

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