Private Capital in 2017 Key Findings from the 2017 Preqin Global - - PowerPoint PPT Presentation

Christopher Elvin

Head of Private Equity Products

Private Capital in 2017

Key Findings from the 2017 Preqin Global AlternaAves Reports

2016 Round-Up

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Private Capital has evolved

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Investor Por<olios Becoming Ever More Diversified

Source: 2017 Preqin Global AlternaAves Reports

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Private Capital AUM at a Record High - $4.5tn

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Jun-16

Natural Resources Infrastructure Real Estate Private Debt Private Equity

Source: 2017 Preqin Global AlternaAves Reports

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Private Capital Fundraising Close to Pre-GFC Levels

100 200 300 400 500 600 700 800 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Aggregate Capital Raised ($bn)

Annual Aggregate Private Capital Raised by Asset Class, 2004 - 2016

Natural Resources Infrastructure Private Debt Real Estate Private Equity

Source: 2017 Preqin Global AlternaAves Reports

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But Capital Becoming More Concentrated

200 400 600 800 1000 1200 1400 1600 1800 2010 2011 2012 2013 2014 2015 2016

Global Annual Private Capital Fundraising, 2010 to 2016

• No. of Funds Closed

Aggregate Capital Raised ($bn)

Source: 2017 Preqin Global AlternaAves Reports

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Record Levels of Capital to Invest

200 400 600 800 1,000 1,200 1,400 1,600 1,800 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Jun-16 Dry Powder ($bn)

Private Capital Dry Powder over Time by Asset Class, 2005 - 2016

Natural Resources Infrastructure Real Estate Private Debt Private Equity

Source: 2017 Preqin Global AlternaAves Reports

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Record Number of Buyout Deals but Value Drops

50 100 150 200 250 300 350 400 450 500 1000 1500 2000 2500 3000 3500 4000 4500 2012 2013 2014 2015 2016

Deal Value ($bn)

• No. of Deals

PE-Backed Buyout Deals, 2012-2016

• No. of Deals

Aggregate Deal Value ($bn) 100 200 300 400 500 600 500 1000 1500 2000 2500 2012 2013 2014 2015 2016

Exit Value ($bn)

• No. of Exits

PE-Backed Buyout Exits, 2012-2016

• No. of Exits

Aggregate Exit Value ($bn)

Source: Private Equity Online

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Venture Capital Deal AcRvity >$100bn for 2nd Year

• 20

40 60 80 100 120 140 160

• 2,000

4,000 6,000 8,000 10,000 12,000 14,000 2012 2013 2014 2015 2016

Deal Value ($bn)

• No. of Deals

Venture Capital Deals, 2012-2016

• No. of Deals

Aggregate Deal Value ($bn)

• 20

40 60 80 100 120 140 200 400 600 800 1000 1200 1400 1600 2012 2013 2014 2015 2016

• No. of Exits

Venture Capital Exits, 2012-2016

• No. of Exits

Aggregate Exit Value ($bn)

Source: Private Equity Online

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Real Estate Exit AcRvity Hits New Highs

• 50

100 150 200 250 300

• 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 2012 2013 2014 2015 2016

Deal Value ($bn)

• No. of Deals

PE-Real Estate Deals, 2012-2016

• No. of Deals

Aggregate Deal Value ($bn) 50 100 150 200 250 500 1000 1500 2000 2500 2012 2013 2014 2015 2016

Exit Value ($bn)

• No. of Exits

PE-Real Estate Exits, 2012-2016

• No. of Exits

Aggregate Exit Value ($bn)

Source: Real Estate Online

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More than 7,900 Limited Partners

49% 28% 15% 8%

Private Capital Limited Partner Universe by LocaAon

North America Europe Asia Pacific Rest of World

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Limited Partner EvoluRon

Challenges Today

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Key Challenges / Issues for Private Capital Fund Managers in 2017

Source: 2017 Preqin Global AlternaAves Reports

Private Equity Private Debt Real Estate Infrastructure Natural Resources Valuations Valuations Valuations Valuations Ongoing Volatility/ Uncertainty in Global Markets Exit Environment Fundraising Ongoing Volatility/ Uncertainty in Global Markets Deal Flow Fundraising Ongoing Volatility/Uncertainty in Global Markets Deal Flow Fundraising Ongoing Volatility/ Uncertainty in Global Markets Public Perception of Industry

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Private Capital: Not Immune from Lower Return Environment

• 5%

0% 5% 10% 15% 20% 25% 30% 1 Year to Jun-13 1 Year to Dec-13 1 Year to Jun-14 1 Year to Dec-14 1 Year to Jun-15 1 Year to Dec-15 1 Year to Jun-16 Median Annualized Return

Rolling One Year Private Capital Horizon IRRs

Real Estate Buyout Venture Capital Mezzanine Private Equity Distressed Private Equity

Source: 2017 Preqin Global AlternaAves Reports

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Private Capital Outperformed in the Long Term

50 100 150 200 250 300 350 Index Returns (Rebased to 100)

PrEQIn Private Capital Quarterly Index vs. S&P 500

Private Capital S&P 500 Index

Source: 2017 Preqin Global AlternaAves Reports

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Dry Powder at Record Levels but Capital Overhang is Decreasing

4.6 4.4 3.4 3.5 4.1 3.5 2.3 2.7 3.6 2.4 2.1 2.5 2.8 2.5

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 RaAo

RaRo of Year-end Private Capital Dry Powder to Prior Year Total Capital Called

Source: 2017 Preqin Global AlternaAves Reports

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Fundraising More CompeRRve Than Ever & Investors are Finding Sourcing Funds More Challenging

0% 20% 40% 60% 80% 100%

Infrastructure Real Estate Hedge Funds Private Equity

LPs Views on Current Fundraising Climate Today vs. 12 Months Ago

More Challenging No Change Less Challenging

Source: 2017 Preqin Global AlternaAves Reports

Outlook for 2017

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Nearly 3,000 Private Capital Funds in Market

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DistribuRons ConRnuing to Outstrip Call-Ups

100 200 300 400 500 600 700 800 900 1000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 H1 2016

Private Capital: Capital Called Up and Distributed, 2000 -2016

Capital Called Up ($bn) Capital Distributed ($bn)

Source: 2017 Preqin Global AlternaAves Reports

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InsRtuRonal Plans for 2017

Source: 2017 Preqin Global AlternaAves Reports

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And for the Longer Term

Source: 2017 Preqin Global AlternaAves Reports

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Fund Managers Confident in Finding Value

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Infrastructure Real Estate Private Equity

Fund Managers Expected Investments in 2017 vs 2016

More Capital Same Amount of Capital Less Capital

Source: 2017 Preqin Global AlternaAves Reports

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Investor Performance ExpectaRons

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Real Estate Infrastructure Private Equity Private Debt Hedge Funds Natural Resources

InsAtuAonal Investors' Return ExpectaAons for AlternaAve Assets in 2017 Compared with 2016

Will Perform Beier Will Perform About the Same Will Perform Worse

Source: 2017 Preqin Global AlternaAves Reports

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Key Takeaways

• Private Capital in robust health – excellent long-term returns driven rapid AUM growth
• Clear current concerns over valuaAons; LPs and GPs alike cauAous about forward-

looking prospects Ø But commiied to further increasing allocaAons – risk/reward airacAve as ever

• Fundraising highly compeAAve and capital becoming increasingly concentrated but

distribuAons and LP saAsfacAon conAnuing to drive

• Deal/Exit acAvity - SAll a seller’s market but wider poliAcal/financial instability may

cause shining of the scales

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Data Sources

• Free reports available from www.preqin.com/research
• Preqin’s online services: www.preqin.com/services