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Perspectives That Drive Enterprise Success PDF Free Download

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Perspectives That Drive Enterprise Success PDF Free Download

Perspectives That Drive Enterprise Success PDF free Download. Think more deeply and widely.

SEPTEMBER2019
PrivateEquityOutlook
VERU.S.INVESTMENTS.COM
SEATTLE206‐622‐3700
LOSANGELES310‐297‐1777
SANFRANCISCO415‐362‐3484
Table of Contents
2
Executive summary 3
Topical focus
— Venturecompaniesstaying
privatelongerforgrowth
6
Buyouts
— U.S.buyouts
— Europeanbuyouts
9
Private credit
— U.S.privatecredit
— Europeanprivatecredit
14
Special situations
— Globalsecondaries
19
Venture capital 21
A
ppendix
— Verusprivateequityphilosophy
— Historicalreturnsbygeography
&approach
25
Executive summary
September2019
PrivateEquityOutlook 3
Observations driving Verus outlook
Theinvestmentclimate
— Ascompaniesremainprivateforlongerandasinvestors
increaseemphasisongrowth,startupsaretakinga
strategicapproachmorecommonlytakenbypublic
companiesandlookingexternallytofuelexpansion
— Amidheavypressuretododeals,thePEindustry
observedanothersurgeininvestmentvaluein2018;
competitionandrisingassetpricescontinuedto
constraindealcountworldwide
— Whilemarketconditionscontinuetoprovideopportunity
toprivateequitybuyers,thenumberoftake‐privatesin
Europehaveswelledmorethantwo‐foldovera12‐
monthperiod
— Persistentexcessreturnabovepublicmarketsand
increasinglyborrower‐friendlyleveragedfinance
conditionsaredrivingmorecapitalintotheassetclass;
howeverthatcapitalisbeingraisedbyfewer,largerfunds
asinvestorsaregravitatingtowardmanagersableto
demonstrateatrackrecord,canleverageimmensescale
andhaveaglobalfootprint
September2019
PrivateEquityOutlook
— Againstabackdropofunprecedentedgrowth,the
secondarymarketcontinuestoevolveandencompass
increasinglycomplextransactionsacrossboththe
sponsor‐ledandLP‐ledsegmentsofthemarket.
Transactionstructuresvariedbysponsorwiththethree
mostcommontransactionstructures;fund
recapitalizations,tenderoffersandspin‐outs.‘Club‐deals’
alsobecamemuchmoreprevalent,particularlyatthe
largerendofthemarket.
— Ahighlevelofinvestmentsandincreasingvaluationsover
thepastseveralyearshaveresultedincompanies
continuingtostayprivatelonger.Asaresult,moreLP
capitalinventurefundsislockedupinunrealizedgains
whichhasledtooverallocationissuesforsomeLPs.
Despitethistrend,annualfundraisinghitanall‐timehigh
in2018asdistributionshavebeenstrongandasnetcash
flowsfromVCfundstoLPshavebeenpositiveeachyear
since2012.
Executive summary
4
Summary of findings
September2019
PrivateEquityOutlook 5
Outlook
Unattractive Neutral Attractive
Strategy Geography Commentary
Buyout
U.S.
Small
U.S.economicgrowthstillontrack,somewhatmoreattractiveentrypricingoverthelargerendofthe
market. However,deceleratingU.S.growthprojections,risinginterestratesandadisruptivepoliticalenvironment
posefuturechallenges.
Large Althoughcreditflowstothelargeendofthemarketcontinuetoberobust; drypowderlevelsarestillhigh,nearpeak
leveldebtandpurchasepricemultiples,equitymarketvolatilityandtradetensionsareimpactingcertainsectors.
Europe
Small ECBmonetarystanceisstillexpansionary,andmoreattractivepricingrelativetotheU.S.maybenefitinvestors;
continueddemandforadd‐onacquisitionsbylargerEuropeanbuyoutfirms
Large Recoveryofgrowth(slowerpace)withinthekeyEUPeripheralcountries,"hardBrexit"riskincreasedsubstantially,
deceleratingEuropeanGDPgrowth(particularlyinGermany),andcontinuedpoliticaldisruptionacrosstheContinent.
Private
Credit
U.S.
Creditagreementscontinuetobecomemoreborrower‐ andprivateequityfirm‐friendly ascovenantliteloans,which
nowcomprise85%ofthebroadlysyndicatedloanmarket;weaknessinthefixedincomemarketattheendof2018,
drovespreadsabove6%.
Europe Withattentionturningtoapotentialmarketcorrection/eventandgeneralmarketuncertaintythereagrowing
interestinunitranche andseniordebtattheexpenseofriskierinvestments
Special
Situations
DistressedDebt RisingU.S.interestratesand normalizingofmonetarypolicy,latecyclepositionoftheU.S.economyandcredit
markets,morecapitalvolatilityasworriesincreaseaboutdebtlevelsandquality.
Secondaries
Recordsecondarydeploymentvolumes,drivenbybothlimitedpartnerdemandandGP‐initiatedtransactions;returns
enhancedbyleverage. Barringmajormarketdisruption,lackofsellingpressurewithsubstantialdrypowder;
overall pricingforsecondaryinterests remainsrobust.
Venture
Capital
EarlyStage RobustInvestmentactivity;targetrichenvironmentacrosstechnologyandhealthcare;earlystagelooksmore
attractiveonarelativebasis
LateStage Heatedpricinginlater‐stage,latercyclemarketdynamicsinU.S,includinghigherequitymarketvolatility;trade
tensionswithChinamayimpactkeyventuresectors.
Topical focus
September2019
PrivateEquityOutlook 6
Topical focus
— AsurgeofcapitalfrombothexistingVCsand
nontraditionalparticipantshasenabledcompanies
toreachunprecedentedsizes.
— Since2014,thenumberofIPOs havedroppedoff
noticeably, whilethenumberofmegarounds has
balloonedtowellovera100a year. Byraisingthese
large privaterounds,morecompanies canstay
privatelonger,thereby avoidingthescrutinyand
demands ofbeingapubliccompany.
— Ascompaniesarestayingprivatelonger,theyare
effectivelyshiftingvaluecreationfromthepublic
marketstotheprivatemarkets.
September2019
PrivateEquityOutlook
Venture backed companies remain private longer as investors increase
emphasis on growth
Source:PitchBook
7
RISEOFTHEMEGA‐ROUNDS
124
87
82
208
‐
50
100
150
200
250
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
IPOCount Mega‐Rounds($100M+)
Topical focus
— Withafloodofcapitalpouringintoventure,many
start‐upsarestockpilingwarchestsbeyondwhatis
neededforoperationsandusingcapitaltofund
outwardexpansionthroughacquisition.
— M&AactivitybyVC‐backedcompaniesaccelerated
quicklyleadingupto2015,coincidingwithasurge
inventurecapitalinvestment.
— Investorsseekinggrowthopportunitieshavebeen
driventoVCasreturnsfromtraditionalassetclasses
struggled.
September2019
PrivateEquityOutlook
M&A continues to fuel growth in venture backed companies
Source:PitchBook
8
M&AACTIVITYBYU.S.VC‐BACKEDCOMPANIES
0
100
200
300
400
500
600
700
800
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Dealvalue($B) Dealcount
Buyouts
September2019
PrivateEquityOutlook 9
FUNDRAISING DEALFLOW EXITSBYTYPE
U.S. buyout
Trends
— Fundraisingactivityslowingdownfromtheheightsseenin2017,fundsof$1billiondollarsormoreinsizesecured78%oftotalfundraising
— Continuedthestrongdealflow;surpassingthe2017all‐timerecordby16.7%intotaldealvaluesand6.9%innumberoftotaldeals
— Fundanddealsizescontinuetoinflatedrivinguppurchasepricemultiples;particularlyintechnology
— AnotherstrongyearforM&Aactivitybystrategicbuyersinresponsetoslowingglobalgrowthascompanyexecutiveslooktoshoreupprofit
marginsamidstworriesofaneconomicdownturn
— PEfirmscontinuestrongactivitybuyingcompaniesviasecondarybuyouts(SBOs)
September2019
PrivateEquityOutlook
Source:PitchBook
10
Buyout made another strong year in 2018
Source:PitchBook Source:PitchBook
0
50
100
150
200
250
300
$0
$50
$100
$150
$200
$250
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
CapitalRaised($B) #ofFundsClosed
0
1,000
2,000
3,000
4,000
5,000
6,000
$0
$100
$200
$300
$400
$500
$600
$700
$800
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
DealValue($B) #ofDealsClosed
0
100
200
300
400
500
600
700
800
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
Total($B) #M&A #IPO #SBO
YIELDSONLEVERAGEDLOANS PURCHASEMULTIPLESANDMEDIANDEBT DEALFLOW(#)BYSIZE
U.S. buyout
2019Environment
— ImpactonvaluationsofU.S.‐basedcompaniesduetouncertaintyoftradewarandtariffs,especiallyforthefirmswithrevenues fromChina
— Partneringamongfundmanagersonportfoliocompaniesinordertocreatescaleadvantageandcostsynergies
— Interestratesstilllow,butashifttorisingratesincreasesthecostofleverage;Significantratemovesmaydisruptfuture buyoutdealactivity
— ContinuedpotentialforastrongexitenvironmentprimarilyduetotherecenttaxreformintheU.S.
Outlook
— Corporationswithstrongprofitsandawindfallfrom2017U.S.taxlegislationareexpectedtocontinuedrivinggrowththroughacquisitions
— Moreverticaladd‐onsexpectingtosharethecapabilityandexpandthepooltopotentialtargets
— Smallbuyoutstocontinueofferingmorecompellingsupply‐demandcharacteristicsthanlargerandmega‐buyouts
— PotentialdealtargetsimpactedbynewtariffstargetingChinaandanyfailureofNAFTAnegotiationsresultinghighertariffs withCanadaandMexico
September2019
PrivateEquityOutlook
Source:S&P/LSTAU.S.LeveragedLoan100Index
11
Buyout purchase price multiples reach new high
Source:PitchBook Source:PitchBook
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
2012 2013 2014 2015 2016 2017 2018
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
0%
10%
20%
30%
40%
50%
60%
70%
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
MedianDebt% Debt/EBITDA Equity/EBITDA
0
1,000
2,000
3,000
4,000
5,000
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
SmBO<$500M MidBO$500M‐$2.5B LgBO>$2.5B
DEALFLOW EXITSBYTYPE PURCHASEMULTIPLES
European buyout
Trends
— FundraisingintheUKisprevalentdespiteuncertaintyofpoliticalpoliciesandlingeringmacroeconomicconcerns;Mega‐fundscontinuetoreflecta
significantshareofthecapitalraised
— DeploymentintonewinvestmentscontinuetosurpassexitsinEuropebyalmost2x
— InvestmentactivitysimilarasthetrendsseenintheU.S.withfewer,butlargerdealsclosed
— Exitactivitiesdropped14.1%,representingtheweakestexitactivitysince2014.
— Secondarybuyoutactivitiesstillclimbing,accountedforhalftheexitactivity;corporateacquirersslowedM&Apacetoincorporaterecent
purchasesintoexistingoperations.
— Withanincreaseintheuseofdebt,medianpricescrepthigherending2018atarecord11.8xEBITDA;higherthanthe11.6xpurchaseprice
multiplesforU.S.buyouts.
September2019
PrivateEquityOutlook
Source:PitchBook
12
Increase in net deployment pace, at higher purchase prices than the U.S.
Source:PitchBook Source:PitchBook
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
€0
€100
€200
€300
€400
€500
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
DealValue(€B) #ofDealsClosed
€0
€50
€100
€150
€200
€250
€300
€350
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
TotalValue(€B) M&A(€B) IPO(€B) SBO(€B)
4.4x
2.5x
4.1x
4.2x
4.4x
4.9x
5.5x
5.6x
5.7x
5.6x
6.1x
4.1x
2.5x
4.3x
4.3x
4.6x
3.6x
4.1x
4.2x
3.0x
4.4x
5.7x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
Debt/EBITDA Equity/EBITDA EV/EBITDA
0
20
40
60
80
100
120
140
160
180
€0
€10
€20
€30
€40
€50
€60
€70
€80
€90
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
CapitalRaised(B) #ofFundsClosed
€0
€10
€20
€30
€40
€50
€60
€70
€80
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
Under€500M €500M‐ €1B €1B‐€5B €5B+
0%
5%
10%
15%
20%
25%
30%
35%
0
20
40
60
80
100
2014 2015 2016 2017 2018
PE/VC NonPE PE(%)
FUNDRAISING FUNDRAISNG(€)BYSIZE PUBLICM&ADEALS(>€200M)PEVS.NON‐PE
European buyout
2019Environment
— EuropeaneconomyappearingtobeslowingdownafterBrexit;GermanyandFranceareattheriskofenteringrecession
— MorecapitalcontinuestoflowintolargerEuropeanbuyoutfunds;fundsgreaterthan€5billioninsizeaccountedforover44%ofcapitalraisedin
2018
— Non‐EuropeaninvestorsstillshowinginterestinEuropeanbusinessestoexpandtheirglobalfootprint,astheirparticipationaccountedfor23.2%of
totalPEdealsin2018,increasingfrom22.4%in2017
— Withmoneytodeployandanearsaturatedmid‐market,privateequityhouseshavemoreactivelypursuedlistedcompanies;asstockmarkets
movethroughacorrectionalphase,thepublicmarketsarefertilegroundofdiscoveredvalue
—Outlook
— Dealactivityremainsrobustduetothehistoriclevelsofdrypowderasbothfundraisingandexitactivityareshowingsigns of slowingdown
— SlowinggrowthinmajorEurozonecountries,andpotentialnegativeimpacttoinvestors’confidenceandeconomicperformanceduetoBrexit
September2019
PrivateEquityOutlook
Source:PitchBook
13
Take-privates gaining an increasing share of deal value
Source:PitchBook Source:DealReporter
Private credit
September2019
PrivateEquityOutlook 14
GROSSYIELDANDSPREADS(DEALS<$200MM) COVENANT‐LITEISSUANCE($BN) LEVERAGEDDEBTTRANSACTIONSCORES
U.S. private credit
Trends
— Inthe1sthalfof2018yieldsandspreadsdiverged,ashigherLIBORmorethanoffsetshrinkingspreads(from4.5%atthestartof2019to4.3%at
theendofMay2018);Wideningspreadsinthe2ndhalfof2018exacerbatedbyweaknessinthefixedincomemarketinDecemberdrovespreads
above6%headinginto2019
— Covenantliteloans,whichnowcomprise85%ofthebroadlysyndicatedloanmarket,havebecomeincreasinglycommoninthedirect lending
market;Middlemarketcovenant‐litedealstotaled$21.6BNin2018whiledownslightlyfrom2017,issuancerepresentsa350%increasefrom
2012’slevels.
— Creditdocumentationquality:Creditagreementscontinuetobecomemoreborrower‐ andprivateequityfirm‐friendlyastheaverage
documentationscoreweakenedfrom3.22in2017to3.43in2018 (Source:CovenantReview;scale:1isthestrongestcreditorprotection;5istheweakest)
— Fundraisinginbecomingharderwiththe67fundstotaling$45billionraisedin2018up9.8%infundsanddown17.3%incommitmentsfrom2017;
Averagesizeofdirectlendingfundin2018was$671.6million,downby24.7%from$891.8millionin2017;Distresseddebtin 2018saw25funds
secure$23billionversusapeakof$45billionin2008—arecordthathasnotbeenequaled
September2019
PrivateEquityOutlook
Source:TheLeadLeft
15
Is the mature direct lending market still attractive?
Source:ThomsonReuters,LPC Source:CovenantReview
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Jan‐17 Jul‐17 Jan‐18 Jul‐18 Jan‐19 Jul‐19
GrossYield Spread
MedianGrossYield MedianSpread
$1
$8
$0 $0 $0
$3
$5
$17 $18
$8
$5
$25
$22
$0
$5
$10
$15
$20
$25
$30
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
2.75
3.00
3.25
3.50
3.75
Oct‐16 Apr‐17 Oct‐17 Apr‐18 Oct‐18 Apr‐19
DocumentationScore 2019YTD
2017Average
U.S. private credit
2019Environment
— EBITDAqualityhasdeterioratedsince2016;35%ofdealshaveuncappedEBITDAadjustments.Fordealswithcaps,themaximumadjustmenthasrisento
22%ofactualEBITDA. Thetimingoftheadjustmentshasalsobeenpushedoutwith56%ofrecognizedadjustmentsoccurringafter 24months.
— LIBOR:loansarefloatingrateinstruments. WithLIBORexpectedtodecreasefrom75bpto1.5%bythestartof2021,directlendersshouldexperiencea
parallelshiftinunleveredgrossyieldabsentspreadswidening.
Outlook
— Persistentexcessreturnabovepublicmarkets:morecapitalisbeingraisedbyfewerfunds;investorsaregravitatingtowardmanagersableto
demonstrateatrackrecordandleveragescalewithaglobalfootprint
— Yieldcompression:thelow‐interest‐rateanddefaultenvironmentintherecentyearshasresultedinanincreasinglyborrower‐friendlyleveragedfinance
conditionsasinvestorsseekhigheryield
— Assetmanagersareincreasinglymakingsustainableinvestmentdecisionsreflectingtheircorporatevalues,butarestillunderpressuretodeliver
competitivereturns
September2019
PrivateEquityOutlook 16
Challenges facing U.S. private credit investors in 2019
EBITDAADJUSTMENTCAPSANDHORIZONS 1‐MONTHLIBOR‐ HISTORICAL,CURRENT&FORWARD
Source:CovenantReview Source:Bloomberg
22%
30%
45%
60%
75%
10%
15%
20%
25%
1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19
%ofEBITDAAdjustmentHorizonbeyond24Months AverageEBITDAAdj.Cap
1.0%
1.5%
2.0%
2.5%
3.0%
HistoricalRates Current1‐monthLIBOR 1‐monthLIBORForward
ANNUALEUROPE‐BASEDPRIVATEDEBTFUNDRAISING(€BN)
European private credit
Trends
— Aswithothermarkets,Europeanfundraisingappearstohaveslowedwhencomparedwitharecord2017;appetitefortheassetclassremains
strongintheregionasLPsseekopportunities
— Moreandmorecapitalingoingintothehandsoffewermanagers,withsomeindicationsthatfundraisingwillbechallenginggoingforward
— WithattentionturningtoapotentialmarketcorrectioncoupledwithgeneralmarketuncertaintycausedbyeventssuchasBrexit, thereisgrowing
interestinunitranche andseniordebtattheexpenseofriskierinvestmentslikemezzanine
September2019
PrivateEquityOutlook
Source:Preqin Source:Preqin
17
PRIVATEDEBT‐BACKEDBUYOUTDEALSINEUROPEBYDEBTTYPE
Availability of private debt continues to expand in Europe
0
5
10
15
20
25
30
35
40
45
0
10
20
30
40
50
60
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
No.ofFundsClosed AggregateCapitalRaised(€bn)
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015 2016 2017 2018 Q12019
Mezzanine Junior/Subordinated Unitranche SeniorDebt
September2019
PrivateEquityOutlook
Source:PreqinPro Source:PreqinPro
18
2019Environment
— DebtmarketsoutsidetheUKhaveseenthegreatestdropinactivityamidthechallengingmarketconditionsandpoliticaltension inEurope.
— Byandlarge,continentalWesternEuropehasbeenthelargestmarketthroughouttheemergenceoftheprivatedebtindustry,recordingthe
highestaggregateprivatedebt‐backeddealvalueeachyearfrom2015to2017
Outlook
— Despiteconcernsaroundvaluationsandwhereweareinthemarketcycle,investorsremaincommittedtotheassetclassandlookingtoincrease
theirexposure
— Fragileinvestorconfidenceintheworld’slargeststockmarkets,increasingpoliticaluncertaintyandthethreatoftighteningmonetarypolicyall
appeartosupportaviewthatitislikelytobemorechallengingthanrecentyearsforbothcorporatesandinvestors.
PRIVATEDEBT‐BACKEDDEALSINEUROPEBYLOCATION EUROPE‐BASEDPRIVATEDEBTASSETSUNDERMANAGEMENT(€BN)
European private credit
When careful underwriting matters most, more capital to be deployed
0
20
40
60
80
100
120
140
AUM(€bn)
DryPowder(€bn) UnrealizedValue(€bn)
45 48
85 97 125
134
116
0
50
100
150
200
250
300
2012 2013 2014 2015 2016 2017 2018
No.ofDeals
UK WesternEurope(Excl.UK) SouthernEurope
Nordic Central&EasternEurope
Special situations
September2019
PrivateEquityOutlook 19
AGGREGATE TRANSACTIONVALUE($B) HISTORICALPRICING(%OFNAV) MARKETCOMPOSITIONBYSELLERTYPE
Global secondaries
Trends
— Drivenbygenerallystablemarketconditionsandasupportivemacro‐economicenvironment2018markedanotherrecordyearoftransactionsforthe
secondarymarket.
— Pricingremainsatall‐timehighs,despitevolatilityinthepublicmarkets,theaverageacrossallfunds wasaround92%ofNAVin2018.
— Thesellertyperemainedbalancedacrossabroadrangeofsellerstakingadvantageofthefavorabledynamics.Theuniversebecamemorediversein
2018drivenprimarilybysponsor‐ledtransactionsaccountingforover30%ofthevolume.
— InnovationwithinthesecondarymarkethasseendramaticgrowthintheGP‐ledtransactionssuchasfundrecapitalizations,tenderoffersorwhole/
partialportfoliosales
2019Environment
— Furtherexpansionofthesecondarymarketwillbedrivenbytheevolutionofsponsor‐ledtransactions
— AssetspecificsalesexpectedtogrowasGPsdesignstructurestoprovideliquiditytoonesetofinvestors,whileinvestinganewonbehalfofothers.
Outlook
— Secondaries: asellers’marketintotheforeseeablefuture.
September2019
PrivateEquityOutlook
Source:Preqin
20
Strong pricing, despite record deal flow
Source:Greenhill Source:Greenhill
0
10
20
30
40
50
60
70
80
'13 '14 '15 '16 '17 '18
92%
97%
83%
70%
80%
90%
100%
'13 '14 '15 '16 '17 '18
AllStrategies Buyout Venture
Endowmentsand
Foundations,6% Fundof
Funds,10%
Financial
Institutions
,19%
Family
Offices,4%
General
Partners,32%
Pension/
SWF,29%
Venture capital
September2019
PrivateEquityOutlook 21
Venture capital
Trends
— U.S.VCdealvaluereached$131billionin2018,a59%increasefrom2017andanalltimehigh
— Dealvaluehasincreaseddramatically,whiledealcountremainstepid;the9,487VCdealsin2018werevaluedat$13.9millionwhilethe9,634
dealsin2017werevaluedat$8.6msuggestingareallocationofcapitalandincreasedfollow‐onfundingtohigherconvictioninvestments
— ThetrendisfurtherexhibitedinU.S.VCfirstfinancingsasdealvalueincreasedfrom$7.5bin2017to$10.3in2018,while dealcountdecreased
from2,799in2017to2,295in2018
September2019
PrivateEquityOutlook 22
Capital investment into U.S. VC reaches all-time highs in 2018
DEALVALUATIONANDDEALCOUNT U.S.VCFIRSTFINANCINGS
Source:PitchBook Source:PitchBook
‐
2,000
4,000
6,000
8,000
10,000
12,000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
$‐
$20
$40
$60
$80
$100
$120
$140
Dealvalue($B) Dealcount
‐
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
$‐
$2
$4
$6
$8
$10
$12
Dealvalue($B) Dealcount
U.S.EARLYSTAGEVCBYDEALSIZE U.S.LATESTAGEVCBYDEALSIZE MEGADEALACTIVITY
Venture capital
Trends
— Acrossallstages,largerdealscontinuetomakeupabiggerportionofrespectivedealvalue
— Earlystage:Dealsgreaterthan$25millionrepresent58%ofdealvaluein2018,aconsiderableincreasefrom45%in2017;atrendthathas
increasedfrom22%in2009and37%in2014
— Latestage:Dealsgreaterthan$50millionrepresent77%ofdealinvaluein2018,surgingfrom50%in2017;driftingupward from29%in2009and
45%in2014
— 2018balloonedinUnicornvaluation,a199%increasefrom2017,withaslightincreasethenumberofdealsclosed;pre‐moneyvaluationforSeries
D+roundstopped$1billion,givingcredencetopotentialmarketfrothiness
September2019
PrivateEquityOutlook
Source:PitchBook.
23
Larger sized deals continue to take larger share of the pie
Source:PitchBook. Source:PitchBook.
0%
20%
40%
60%
80%
100%
Under$500K $500K‐$1M $1M‐$5M
$10M‐$25M $25M+
0%
20%
40%
60%
80%
100%
Under$1M $1M‐$5M $5M‐$10M
$25‐$50M $50M+
‐
20
40
60
80
100
120
140
160
180
$0
$10
$20
$30
$40
$50
$60
$70
DealValue($B) EarlyVC LaterVC
U.S.VCFUNDRAISING NON‐TRADITIONALINVESTORACTIVITY UNICORNACTIVITY
Venture capital
2019Environment
— Despitetheslightincreaseofthenumberoffundsraised,commitmentsofover$50billionforgedaheadofthe$34.4billionraisedin2017,
signifyingincreasedfundsizesacrosstheindustry
— Thenumberofcompaniesvaluedatover$1billioncontinuestoswell—asdoestheirage— drivinganeedforliquidity.Recentpublic
announcementsofIPOplansfrommanynotableVC‐backedcompaniesindicatethatIPOswillmakeupagreaterpercentageof2019exits
— U.S.corporateventurecapital("CVC"),continuestoplayanever‐increasingroleafternearlydoublingitsparticipationin2018forover$70billionin
dealvalue;acrossallstagesCVCrepresentsadealvaluationincreaseof2‐3xovertraditionalventurecapitalfinancing
Outlook
— Demand,capitalinvestment,andpriceoflate‐stagedealswillsurgeascorporateventuregroups,sovereignwealthfunds,mutual fundsandhedge
fundsallcompete;increasingvaluationsacrossallstagesimpacttheabilitytoeffectivelyassessventureportfolios
— Withlargerfundsizesandcapitalexposure,LPsbecomeincreasinglyreliantonmanagerswithdisciplineandexperiencetonavigatethecycle
September2019
PrivateEquityOutlook
Source:PitchBook.
24
Too much dry powder fueling valuation growth
Source:PitchBook. Source:PitchBook.
‐
50
100
150
200
250
300
350
$‐
$10
$20
$30
$40
$50
$60
Capitalraised($B) Fundcount
‐
500
1,000
1,500
2,000
2,500
$‐
$20
$40
$60
$80
$100
DealValue($B) #ofDealsClosed
‐
20
40
60
80
100
120
140
$0
$10
$20
$30
$40
$50
DealValue($B) #ofDealsClosed
Appendix
September2019
PrivateEquityOutlook 25
Verus private equity philosophy
September2019
PrivateEquityOutlook 26
— Privateequityisalong‐termassetclass:
Fundsdeploycapitalintonewinvestmentsoverathree‐ tofive‐yearperiod
Afterinvestment,portfoliocompaniesareheldforaperiodoffourtosevenyears
onaveragepriortoexit
Thistypicalinvestmentcoursedrivesdiscretefundlivestooftenlastbeyond10
years,duringwhichsignificantchangescanoccur
— Toaddressthisphenomenon,investorsgenerally“averagein”tothemarket
bybuildingportfoliosofdiscreteprivateequityfundsovermultiplevintage
years
— Forthesereasons,significanttacticalshiftsarenoteasilyimplementedin
privatemarketsportfolios
— Ourtop‐downreviewoftheassetclassincorporatescurrenttrends,which
ifsustained,canpotentiallyimpactreturnsoverthelongterm
We believe that
careful manager
selection is the
primary driver of
returns
That said, macro
and top-down
conditions have
the potential to
impact portfolio
returns over the
long term
Detailed returns by geography
September2019
PrivateEquityOutlook
*AllPrivateEquityexcludesNaturalResource,Infrastructure,RealEstate,FundofFundsandSecondaryFunds.
Source:ThomsonReutersC|AasofDecember31,2018
27
PooledReturnsbyGeography 1Year 3Year 5Year 10Year 20Year FundCount TotalCapitalization($B)
U.S.AllPrivateEquity* 12.9 13.1 12.8 14.9 12.9 3,418 2,210.1
EuropeAllPrivateEquity* 8.4 17.0 10.6 12.1 14.0 673 648.6
AsiaAllPrivateEquity* 8.1 11.1 13.5 14.9 11.7 608 306.4
LatAMAllPrivateEquity* (2.3) 5.9 0.4 4.0 3.0 64 28.3
AfricaAllPrivateEquity* 3.6 5.3 2.3 5.2 6.5 47 12.5
MiddleEastAllPrivateEquity* 8.7 6.9 7.7 8.3 4.2 67 10.9
PublicIndex
Russell3000 (5.2) 9.0 7.9 13.2 6.0
MSCIEurope (14.9) 2.1 (0.6) 6.1 3.2
MSCIACAsiaPacific (13.5) 6.1 3.2 7.7 5.1
MSCIEMLatinAmerica (6.6) 14.8 (1.7) 5.0 9.0
MSCIFMAfrica (12.8) 0.8 (6.2) 2.9 ‐
70%MSCIArabian/30%MSCIIsrael 8.6 3.5 2.3 6.3 ‐
Outperformancevs.PublicIndex
U.S.AllPrivateEquity* 18.1 4.1 4.9 1.7 6.9
EuropeAllPrivateEquity* 23.3 14.9 11.2 6.0 10.8
AsiaAllPrivateEquity* 21.6 5.0 10.3 7.2 6.6
LatAMAllPrivateEquity* 4.3 (8.9) 2.2 (1.0) (6.0)
AfricaAllPrivateEquity* 16.4 4.5 8.5 2.3 ‐
MiddleEastAllPrivateEquity* 0.1 3.4 5.4 2.0 ‐
Pooled returns by implementation approach
September2019
PrivateEquityOutlook
*AllPrivateEquityexcludesNaturalResource,Infrastructure,RealEstate,FundofFundsandSecondaryFunds.
**GlobalFundsinvestacrosstheglobe,withoutanytargetedregionsforinvestment.
Source:ThomsonReutersC|AasofDecember31,2018
28
PooledReturnsby
ImplementationApproach 1Year 3Year 5Year 10Year 20Year FundCount TotalCapitalization($B)
U.S.PooledReturns
U.S.AllPrivateEquityDirect* 12.9 13.1 12.8 14.9 12.9 3,418 2,210.1
U.S.FundofFunds 12.4 9.3 10.8 11.6 9.2 456 146.5
U.S.SecondaryFunds 8.9 10.5 9.6 12.1 11.8 182 145.0
EuropePooledReturns
EuropeAllPrivateEquityDirect* 8.4 17.0 10.6 12.1 14.0 673 648.6
EuropeFundofFunds 6.1 11.0 7.2 8.8 8.4 71 30.1
EuropeSecondaryFunds 9.4 9.7 10.0 10.7 13.6 36 19.0
AsiaPooledReturns
AsiaAllPrivateEquity 8.1 11.1 13.5 14.9 11.7 608 306.4
AsiaFundofFunds 10.9 10.1 13.6 11.7 10.0 57 19.3
GlobalPooledReturns
GlobalAllPrivateEquityDirect** 2.6 10.1 7.5 12.6 10.0 189 251.7
GlobalFundofFunds** 9.7 11.4 10.0 10.3 9.1 86 30.6
GlobalSecondaryFunds** 13.0 16.3 17.4 13.2 ‐ 18 28.1
AllRegionPooledReturns
AllRegionsPrivateEquityDirect* 10.6 13.0 11.8 14.0 12.6 5,110 3,477.6
AllRegionsFundofFunds 11.3 9.9 10.5 11.0 9.2 678 227.5
AllRegionsSecondaryFunds 9.7 11.3 10.6 12.1 12.3 242 192.9
PublicIndex
Russell3000 (5.2) 9.0 7.9 13.2 6.0
MSCIEurope (14.9) 2.1 (0.6) 6.1 3.2
MSCIACAsiaPacific (13.5) 6.1 3.2 7.7 5.1
MSCIACWI (9.4) 6.6 4.3 9.5 4.5
Pooled returns outperformance
September2019
PrivateEquityOutlook
*AllPrivateEquityexcludesNaturalResource,Infrastructure,RealEstate,FundofFundsandSecondaryFunds.
**GlobalFundsinvestacrosstheglobe,withoutanytargetedregionsforinvestment.
Source:ThomsonReutersC|AasofDecember31,2018
29
Outperformancevs.PublicIndex
U.S.Outperformance
U.S.AllPrivateEquityDirect* 18.1 4.1 4.9 1.7 6.9
U.S.FundofFunds 17.6 0.3 2.9 (1.6) 3.2
U.S.SecondaryFunds 14.1 1.5 1.7 (1.1) 5.8
EuropeOutperformance
EuropeAllPrivateEquityDirect* 23.3 14.9 11.2 6.0 10.8
EuropeFundofFunds 21.0 8.9 7.8 2.7 5.2
EuropeSecondaryFunds 24.3 7.6 10.6 4.6 10.4
AsiaOutperformance
AsiaAllPrivateEquity* 21.6 5.0 10.3 7.2 6.6
AsiaFundofFunds 24.4 4.0 10.4 4.0 4.9
AllRegionOutperformance
AllRegionsPrivateEquityDirect* 20.0 6.4 7.5 4.5 8.1
AllRegionsFundofFunds 20.7 3.3 6.2 1.5 4.7
AllRegionsSecondaryFunds 19.1 4.7 6.3 2.6 7.8
U.S. returns
September2019
PrivateEquityOutlook
*AllPrivateEquityexcludesNaturalResource,Infrastructure,RealEstate,FundofFundsandSecondaryFunds.
Source:ThomsonReutersC|AasofDecember31,2018
30
U.S.PooledReturns 1Year 3Year 5Year 10Year 20Year
Fund
Count TotalCapitalization($B)
PrivateEquityPooledReturns
U.S.VentureCapital 18.1 9.5 12.9 12.8 21.4 1,858 402.2
U.S.GrowthEquity 19.6 17.4 14.4 15.6 16.7 266 253.5
U.S.Buyouts 10.7 14.3 13.5 15.6 11.8 862 1,172.8
U.S.Debt‐Related 6.0 10.4 8.3 14.3 9.9 432 381.6
U.S.AllPrivateEquity* 12.9 13.1 12.8 14.9 12.9 3,418 2,210.1
PublicIndex
S&P500 (4.4) 9.3 8.5 13.1 5.6
Russell3000 (5.2) 9.0 7.9 13.2 6.0
Barclay’sAggregate 0.0 2.1 2.5 3.5 4.5
Outperformance
AllPEOutperformance* 18.1 4.1 4.9 1.7 6.9
Debt‐RelatedOutperformance 6.0 8.3 5.8 10.8 5.4
Europe returns
September2019
PrivateEquityOutlook
*AllPrivateEquityexcludesNaturalResource,Infrastructure,RealEstate,FundofFundsandSecondaryFunds.
Source:ThomsonReutersC|AasofDecember31,2018
31
EuropePooledReturns 1Year 3Year 5Year 10Year 20Year
Fund
Count TotalCapitalization($B)
PrivateEquityPooledReturns
EuropeVenture 26.3 15.7 13.6 11.7 8.1 147 28.6
EuropeGrowthEquity 10.5 16.9 11.6 11.6 12.7 42 12.8
EuropeBuyouts 7.6 17.9 10.6 12.4 14.8 428 541.2
EuropeDebt‐Related 3.5 12.0 8.2 8.3 8.9 56 66.1
EuropeAllPrivateEquity* 8.4 17.0 10.6 12.1 14.0 673 648.6
PublicIndex
MSCIEurope (14.9) 2.1 (0.6) 6.1 3.2
BarclaysPanEuropeanAggregate 0.1 0.7 3.3 4.5 4.3
Outperformance
AllPEOutperformance* 23.3 14.9 11.2 6.0 10.8
Debt‐RelatedOutperformance 3.4 11.3 4.9 3.8 4.6
Asia, Latin America, Africa, Middle East
returns
September2019
PrivateEquityOutlook
*AllPrivateEquityexcludesNaturalResource,Infrastructure,RealEstate,FundofFundsandSecondaryFunds.
Source:ThomsonReutersC|AasofDecember31,2018
32
Asia,LatinAmerica,Africa,MiddleEast 1Year 3Year 5Year 10Year 20Year
Fund
Count TotalCapitalization($B)
PrivateEquityPooledReturns
AsiaAllPrivateEquity* 8.1 11.1 13.5 14.9 11.7 608 306.4
LatAMAllPrivateEquity* (2.3) 5.9 0.4 4.0 3.0 64 28.3
AfricaAllPrivateEquity* 3.6 5.3 2.3 5.2 6.5 47 12.5
MiddleEastAllPrivateEquity* 8.7 6.9 7.7 8.3 4.2 67 10.9
PublicIndex
MSCIEmergingMarkets (14.6) 9.2 1.6 8.0 8.5
MSCIACAsiaPacific (13.5) 6.1 3.2 7.7 5.1
MSCIEMLatinAmerica (6.6) 14.8 (1.7) 5.0 9.0
MSCIFMAfrica (12.8) 0.8 (6.2) 2.9 ‐
70%MSCIArabian/30%MSCIIsrael 8.6 3.5 2.3 6.3 ‐
Outperformance
AsiaAllPrivateEquity* 21.6 5.0 10.3 7.2 6.6
LatAMAllPrivateEquity* 4.3 (8.9) 2.2 (1.0) (6.0)
AfricaAllPrivateEquity* 16.4 4.5 8.5 2.3 ‐
MiddleEastAllPrivateEquity* 0.1 3.4 5.4 2.0 ‐
Sub-asset class returns
September2019
PrivateEquityOutlook
*AllPrivateEquityexcludesNaturalResource,Infrastructure,RealEstate,FundofFundsandSecondaryFunds.
Source:ThomsonReutersC|AasofDecember31,2018
33
U.S.PooledReturns 1Year 3Year 5Year 10Year 20Year
Fund
Count
TotalCapitalization
($B)
PrivateEquityPooledReturns
U.S.VentureCapital 18.1 9.5 12.9 12.8 21.4 1,858 402.2
U.S.GrowthEquity 19.6 17.4 14.4 15.6 16.7 266 253.5
U.S.Buyouts 10.7 14.3 13.5 15.6 11.8 862 1,172.8
U.S.Debt‐Related 6.0 10.4 8.3 14.3 9.9 432 381.6
U.S.AllPrivateEquity* 12.9 13.1 12.8 14.9 12.9 3,418 2,210.1
EuropePooledReturns 1Year 3Year 5Year 10Year 20Year
Fund
Count
TotalCapitalization
($B)
PrivateEquityPooledReturns
EuropeVenture 26.3 15.7 13.6 11.7 8.1 147 28.6
EuropeGrowthEquity 10.5 16.9 11.6 11.6 12.7 42 12.8
EuropeBuyouts 7.6 17.9 10.6 12.4 14.8 428 541.2
EuropeDebt‐Related 3.5 12.0 8.2 8.3 8.9 56 66.1
EuropeAllPrivateEquity* 8.4 17.0 10.6 12.1 14.0 673 648.6
Asia,LatinAmerica,Africa,MiddleEast 1Year 3Year 5Year 10Year 20Year
Fund
Count
TotalCapitalization
($B)
PrivateEquityPooledReturns
AsiaAllPrivateEquity* 8.1 11.1 13.5 14.9 11.7 608 306.4
LatAMAllPrivateEquity* (2.3) 5.9 0.4 4.0 3.0 64 28.3
AfricaAllPrivateEquity* 3.6 5.3 2.3 5.2 6.5 47 12.5
MiddleEastAllPrivateEquity* 8.7 6.9 7.7 8.3 4.2 67 10.9
Sub-asset class returns – Fund of funds
September2019
PrivateEquityOutlook
**GlobalFundsinvestacrosstheglobe,withoutanytargetedregionsforinvestment.
Source:ThomsonReutersC|AasofDecember31,2018
34
FundofFundsbyGeography 1Year 3Year 5Year 10Year 20Year
Fund
Count
Total
Capitalization($B)
PrivateEquityPooledReturns
U.S.FundofFunds 12.4 9.3 10.8 11.6 9.2 456 146.5
EuropeFundofFunds 6.1 11.0 7.2 8.8 8.4 71 30.1
AsiaFundofFunds 10.9 10.1 13.6 11.7 10.0 57 19.3
GlobalFundofFunds** 9.7 11.4 10.0 10.3 9.1 86 30.6
AllFundofFunds 11.3 9.9 10.5 11.0 9.2 678 227.5
PublicIndex
Russell3000 (5.2) 9.0 7.9 13.2 6.0
MSCIEurope (14.9) 2.1 (0.6) 6.1 3.2
MSCIACAsiaPacific (13.5) 6.1 3.2 7.7 5.1
MSCIACWI (9.4) 6.6 4.3 9.5 4.5
Outperformance
U.S.FundofFunds 17.6 0.3 2.9 (1.6) 3.2
EuropeFundofFunds 19.6 4.9 4.0 1.1 3.3
AsiaFundofFunds 20.3 3.5 9.3 2.2 5.5
GlobalFundofFunds** 9.7 11.4 10.0 10.3 9.1
Sub-asset class returns – Fund of funds
(continued)
September2019
PrivateEquityOutlook
**GlobalFundsinvestacrosstheglobe,withoutanytargetedregionsforinvestment.
(1)AllFundofFundsmayoccasionallyco‐investinprivatecompaniesand/orinvestinsecondarytransactions.
EuropeandAsiaVentureCapitalFundofFundshavelessthan3fundsandthereforeincludedintheAllEuropeandAsiaFoF pooledreturns.
Source:ThomsonReutersC|AasofDecember31,2018
35
FundofFundsbySubAssetClass(1) 1Year 3Year 5Year 10Year 20Year
Fund
Count
Total
Capitalization
($B)
PrivateEquityPooledReturns
U.S.BuyoutFundofFunds 8.9 10.3 10.3 11.8 9.8 185 64.9
U.S.VentureCapitalFundofFunds 15.2 8.4 11.8 11.7 9.2 162 48.0
U.S.VentureCapital&BuyoutFundof
Funds 12.8 9.4 9.8 10.8 8.2 109 33.6
U.S.FundofFunds 12.4 9.3 10.8 11.6 9.2 456 146.5
EuropeBuyoutFundofFunds 5.6 11.2 7.0 8.9 8.5 61 27.3
EuropeVC&BuyoutFundofFunds 9.7 9.2 9.6 8.6 7.1 8 2.6
EuropeFundofFunds 6.1 11.0 7.2 8.8 8.4 71 30.1
AsiaBuyoutFundofFunds 10.6 9.7 13.7 12.8 11.1 39 12.8
AsiaVC&BuyoutFundofFunds 12.6 12.6 13.1 5.7 ‐ 17 6.4
AsiaFundofFunds 10.9 10.1 13.6 11.7 10.0 57 19.3
GlobalBuyoutFundofFunds** 4.3 10.5 8.3 9.8 9.0 60 22.9
GlobalVentureCapitalFundofFunds** 24.1 16.1 19.7 15.5 ‐ 12 4.1
GlobalVC&BuyoutFundofFunds** 10.9 8.9 9.2 9.3 ‐ 14 3.6
GlobalFundofFunds** 9.7 11.4 10.0 10.3 9.1 86 30.6
FundofFundsbySubAssetClass(1) 1Year 3Year 5Year 10Year 20Year
PublicIndex
Russell3000 (5.2) 9.0 7.9 13.2 6.0
MSCIEurope (14.9) 2.1 (0.6) 6.1 3.2
MSCIACAsiaPacific (13.5) 6.1 3.2 7.7 5.1
MSCIACWI (9.4) 6.6 4.3 9.5 4.5
Outperformancevs.PublicIndex
U.S.BuyoutFundofFunds 14.1 1.3 2.4 (1.4) 3.8
U.S.VentureCapitalFundofFunds 20.4 (0.6) 3.9 (1.5) 3.2
U.S.VentureCapital&BuyoutFundof
Funds 18.0 0.4 1.9 (2.4) 2.2
U.S.FundofFunds 17.6 0.3 2.9 (1.6) 3.2
EuropeBuyoutFundofFunds 20.5 9.1 7.6 2.8 5.3
EuropeVC&BuyoutFundofFunds 24.6 7.1 10.2 2.5 3.9
EuropeFundofFunds 21.0 8.9 7.8 2.7 5.2
AsiaBuyoutFundofFunds 24.1 3.6 10.5 5.1 6.0
AsiaVC&BuyoutFundofFunds 26.1 6.5 9.9 (2.0) ‐
AsiaFundofFunds 24.4 4.0 10.4 4.0 4.9
GlobalBuyoutFundofFunds** 13.7 3.9 4.0 0.3 4.5
GlobalVentureCapitalFundofFunds** 33.5 9.5 15.4 6.0 ‐
GlobalVC&BuyoutFundofFunds** 20.3 2.3 4.9 (0.2) ‐
GlobalFundofFunds** 19.1 4.8 5.7 0.8 4.6
Sub-asset class returns – Secondaries
September2019
PrivateEquityOutlook
**GlobalFundsinvestacrosstheglobe,withoutanytargetedregionsforinvestment.
(2)Regionsthathavelessthan3fundsareonlyincludedintheAllSecondaryFundspooledreturns.
Source:ThomsonReutersC|AasofDecember31,2018
36
SecondaryFunds 1Year 3Year 5Year 10Year 20Year
Fund
Count
Total
Capitalization($B)
PrivateEquityPooledReturns
U.S.SecondaryFunds 8.9 10.5 9.6 12.1 11.8 182 145.0
EuropeSecondaryFunds 9.4 9.7 10.0 10.7 13.6 36 19.0
GlobalSecondaryFunds** 13.0 16.3 17.4 13.2 ‐ 18 28.1
AllSecondaryFunds (1) 9.7 11.3 10.6 12.1 12.3 242 192.9
PublicIndex
Russell3000 (5.2) 9.0 7.9 13.2 6.0
MSCIACWI (9.4) 6.6 4.3 9.5 4.5
MSCIACWI (9.4) 6.6 4.3 9.5 4.5
Outperformance
U.S.SecondaryFunds 14.1 1.5 1.7 (1.1) 5.8
EuropeSecondaryFunds 18.8 3.1 5.7 1.2 9.1
GlobalSecondaryFunds** 22.4 9.7 13.1 3.7 ‐
Geography and approach
September2019
PrivateEquityOutlook
*AllPrivateEquityexcludesNaturalResource,Infrastructure,RealEstate,FundofFundsandSecondaryFunds.
Source:ThomsonReutersC|AasofDecember31,2018
37
PooledReturnsby
Geography
1
Year
3
Year
5
Year
10
Year
20
Year
Fund
Count
Total
Capitalization
($B)
U.S.AllPrivateEquity* 12.9 13.1 12.8 14.9 12.9 3,418 2,210.1
EuropeAllPrivateEquity* 8.4 17.0 10.6 12.1 14.0 673 648.6
AsiaAllPrivateEquity* 8.1 11.1 13.5 14.9 11.7 608 306.4
LatAMAllPrivateEquity* (2.3) 5.9 0.4 4.0 3.0 64 28.3
AfricaAllPrivateEquity* 3.6 5.3 2.3 5.2 6.5 47 12.5
MiddleEastAllPrivateEquity* 8.7 6.9 7.7 8.3 4.2 67 10.9
PublicIndex
Russell3000 (5.2) 9.0 7.9 13.2 6.0
MSCIEurope (14.9) 2.1 (0.6) 6.1 3.2
MSCIACAsiaPacific (13.5) 6.1 3.2 7.7 5.1
MSCIEMLatinAmerica (6.6) 14.8 (1.7) 5.0 9.0
MSCIFMAfrica (12.8) 0.8 (6.2) 2.9 ‐
70%MSCIArabian/30%MSCI
Israel 8.6 3.5 2.3 6.3 ‐
Outperformancevs.Public
Index
U.S.AllPrivateEquity* 18.1 4.1 4.9 1.7 6.9
EuropeAllPrivateEquity* 23.3 14.9 11.2 6.0 10.8
AsiaAllPrivateEquity* 21.6 5.0 10.3 7.2 6.6
LatAMAllPrivateEquity* 4.3 (8.9) 2.2 (1.0) (6.0)
AfricaAllPrivateEquity* 16.4 4.5 8.5 2.3 ‐
MiddleEastAllPrivateEquity* 0.1 3.4 5.4 2.0 ‐
PooledReturnsby
ImplementationApproach
1
Year
3
Year
5
Year
10
Year
20
Year
Fund
Count
Total
Capitalization
($B)
U.S.PooledReturns
U.S.AllPrivateEquityDirect* 12.9 13.1 12.8 14.9 12.9 3,418 2,210.1
U.S.FundofFunds 12.4 9.3 10.8 11.6 9.2 456 146.5
U.S.SecondaryFunds 8.9 10.5 9.6 12.1 11.8 182 145.0
EuropePooledReturns
EuropeAllPrivateEquity
Direct* 8.4 17.0 10.6 12.1 14.0 673 648.6
EuropeFundofFunds 6.1 11.0 7.2 8.8 8.4 71 30.1
EuropeSecondaryFunds 9.4 9.7 10.0 10.7 13.6 36 19.0
AsiaPooledReturns
AsiaAllPrivateEquity 8.1 11.1 13.5 14.9 11.7 608 306.4
AsiaFundofFunds 10.9 10.1 13.6 11.7 10.0 57 19.3
Geography and approach (continued)
September2019
PrivateEquityOutlook
*AllPrivateEquityexcludesNaturalResource,Infrastructure,RealEstate,FundofFundsandSecondaryFunds.
**GlobalFundsinvestacrosstheglobe,withoutanytargetedregionsforinvestment.
Source:ThomsonReutersC|AasofDecember31,2018
38
GlobalPooledReturns
1
Year
3
Year
5
Year
10
Year
20
Year
Fund
Count
Total
Capitalization
($B)
GlobalAllPrivateEquityDirect** 2.6 10.1 7.5 12.6 10.0 189 251.7
GlobalFundofFunds** 9.7 11.4 10.0 10.3 9.1 86 30.6
GlobalSecondaryFunds** 13.0 16.3 17.4 13.2 ‐ 18 28.1
AllRegionPooledReturns
AllRegionsPrivateEquityDirect* 10.6 13.0 11.8 14.0 12.6 5,110 3,477.6
AllRegionsFundofFunds 11.3 9.9 10.5 11.0 9.2 678 227.5
AllRegionsSecondaryFunds 9.7 11.3 10.6 12.1 12.3 242 192.9
PublicIndex
Russell3000 (5.2) 9.0 7.9 13.2 6.0
MSCIEurope (14.9) 2.1 (0.6) 6.1 3.2
MSCIACAsiaPacific (13.5) 6.1 3.2 7.7 5.1
MSCIACWI (9.4) 6.6 4.3 9.5 4.5
Outperformancevs.PublicIndex 1Year 3Year 5Year 10Year 20Year
U.S.Outperformance
U.S.AllPrivateEquityDirect* 18.1 4.1 4.9 1.7 6.9
U.S.FundofFunds 17.6 0.3 2.9 (1.6) 3.2
U.S.SecondaryFunds 14.1 1.5 1.7 (1.1) 5.8
EuropeOutperformance
EuropeAllPrivateEquityDirect* 23.3 14.9 11.2 6.0 10.8
EuropeFundofFunds 21.0 8.9 7.8 2.7 5.2
EuropeSecondaryFunds 24.3 7.6 10.6 4.6 10.4
AsiaOutperformance
AsiaAllPrivateEquity* 21.6 5.0 10.3 7.2 6.6
AsiaFundofFunds 24.4 4.0 10.4 4.0 4.9
AllRegionOutperformance
AllRegionsPrivateEquityDirect* 20.0 6.4 7.5 4.5 8.1
AllRegionsFundofFunds 20.7 3.3 6.2 1.5 4.7
AllRegionsSecondaryFunds 19.1 4.7 6.3 2.6 7.8
Geographies with outperformance
September2019
PrivateEquityOutlook
*AllPrivateEquityexcludesNaturalResource,Infrastructure,RealEstate,FundofFundsandSecondaryFunds.
Source:ThomsonReutersC|AasofDecember31,2018
39
U.S.PooledReturns
1
Year
3
Year
5
Year
10
Year
20
Year
Fund
Count
Total
Capitalization
($B)
PrivateEquityPooledReturns
U.S.VentureCapital 18.1 9.5 12.9 12.8 21.4 1,858 402.2
U.S.GrowthEquity 19.6 17.4 14.4 15.6 16.7 266 253.5
U.S.Buyouts 10.7 14.3 13.5 15.6 11.8 862 1,172.8
U.S.Debt‐Related 6.0 10.4 8.3 14.3 9.9 432 381.6
U.S.AllPrivateEquity* 12.9 13.1 12.8 14.9 12.9 3,418 2,210.1
PublicIndex
S&P500 (4.4) 9.3 8.5 13.1 5.6
Russell3000 (5.2) 9.0 7.9 13.2 6.0
Barclay’sAggregate 0.0 2.1 2.5 3.5 4.5
Outperformance
AllPEOutperformance* 18.1 4.1 4.9 1.7 6.9
Debt‐RelatedOutperformance 6.0 8.3 5.8 10.8 5.4
EuropePooledReturns 1Year
3
Year
5
Year
10
Year
20
Year
Fund
Count
Total
Capitalization
($B)
PrivateEquityPooledReturns
EuropeVenture 26.3 15.7 13.6 11.7 8.1 147 28.6
EuropeGrowthEquity 10.5 16.9 11.6 11.6 12.7 42 12.8
EuropeBuyouts 7.6 17.9 10.6 12.4 14.8 428 541.2
EuropeDebt‐Related 3.5 12.0 8.2 8.3 8.9 56 66.1
EuropeAllPrivateEquity* 8.4 17.0 10.6 12.1 14.0 673 648.6
PublicIndex
MSCIEurope (14.9) 2.1 (0.6) 6.1 3.2
BarclaysPanEuropeanAggregate 0.1 0.7 3.3 4.5 4.3
Outperformance
AllPEOutperformance* 23.3 14.9 11.2 6.0 10.8
Debt‐RelatedOutperformance 3.4 11.3 4.9 3.8 4.6
Asia,LatinAmerica,Africa,MiddleEast
1
Year 3Year 5Year
10
Year
20
Year
Fund
Count
Total
Capitalization
($B)
PrivateEquityPooledReturns
AsiaAllPrivateEquity* 8.1 11.1 13.5 14.9 11.7 608 306.4
LatAMAllPrivateEquity* (2.3) 5.9 0.4 4.0 3.0 64 28.3
AfricaAllPrivateEquity* 3.6 5.3 2.3 5.2 6.5 47 12.5
MiddleEastAllPrivateEquity* 8.7 6.9 7.7 8.3 4.2 67 10.9
PublicIndex
MSCIEmergingMarkets (14.6) 9.2 1.6 8.0 8.5
MSCIACAsiaPacific (13.5) 6.1 3.2 7.7 5.1
MSCIEMLatinAmerica (6.6) 14.8 (1.7) 5.0 9.0
MSCIFMAfrica (12.8) 0.8 (6.2) 2.9 ‐
70%MSCIArabian/30%MSCIIsrael 8.6 3.5 2.3 6.3 ‐
Outperformance
AsiaAllPrivateEquity* 21.6 5.0 10.3 7.2 6.6
LatAMAllPrivateEquity* 4.3 (8.9) 2.2 (1.0) (6.0)
AfricaAllPrivateEquity* 16.4 4.5 8.5 2.3 ‐
MiddleEastAllPrivateEquity* 0.1 3.4 5.4 2.0 ‐
Geographies with sub-asset classes
excluding outperformance
September2019
PrivateEquityOutlook
*AllPrivateEquityexcludesNaturalResource,Infrastructure,RealEstate,FundofFundsandSecondaryFunds.
Source:ThomsonReutersC|AasofDecember31,2018
40
PooledReturnsbyGeography 1Year 3Year 5Year 10Year 20Year
U.S.AllPrivateEquity* 12.9 13.1 12.8 14.9 12.9
EuropeAllPrivateEquity* 8.4 17.0 10.6 12.1 14.0
AsiaAllPrivateEquity* 8.1 11.1 13.5 14.9 11.7
LatAMAllPrivateEquity* (2.3) 5.9 0.4 4.0 3.0
AfricaAllPrivateEquity* 3.6 5.3 2.3 5.2 6.5
MiddleEastAllPrivateEquity* 8.7 6.9 7.7 8.3 4.2
U.S.PooledReturns 1Year 3Year 5Year 10Year 20Year
PrivateEquityPooledReturns
U.S.VentureCapital 18.1 9.5 12.9 12.8 21.4
U.S.GrowthEquity 19.6 17.4 14.4 15.6 16.7
U.S.Buyouts 10.7 14.3 13.5 15.6 11.8
U.S.Debt‐Related 6.0 10.4 8.3 14.3 9.9
U.S.AllPrivateEquity* 12.9 13.1 12.8 14.9 12.9
EuropePooledReturns 1Year 3Year 5Year 10Year 20Year
PrivateEquityPooledReturns
EuropeVenture 26.3 15.7 13.6 11.7 8.1
EuropeGrowthEquity 10.5 16.9 11.6 11.6 12.7
EuropeBuyouts 7.6 17.9 10.6 12.4 14.8
EuropeDebt‐Related 3.5 12.0 8.2 8.3 8.9
EuropeAllPrivateEquity* 8.4 17.0 10.6 12.1 14.0
Asia,LatinAmerica,Africa,MiddleEast 1Year 3Year 5Year 10Year 20Year
PrivateEquityPooledReturns
AsiaAllPrivateEquity* 8.1 11.1 13.5 14.9 11.7
LatAMAllPrivateEquity* (2.3) 5.9 0.4 4.0 3.0
AfricaAllPrivateEquity* 3.6 5.3 2.3 5.2 6.5
MiddleEastAllPrivateEquity* 8.7 6.9 7.7 8.3 4.2
Notices & disclosures
Pastperformanceisnoguaranteeoffutureresults.Thisreportorpresentationisprovidedforinformationalpurposesonlyandisdirectedto
institutionalclientsandeligibleinstitutionalcounterpartiesonlyandshouldnotberelieduponbyretailinvestors.Nothinghereinconstitutesinvestment,
legal,accountingortaxadvice,orarecommendationtobuy,sellorholdasecurityorpursueaparticularinvestmentvehicleoranytradingstrategy.The
opinionsandinformationexpressedarecurrentasofthedateprovidedorcitedonlyandaresubjecttochangewithoutnotice.Thisinformationis
obtainedfromsourcesdeemedreliable,butthereisnorepresentationorwarrantyastoitsaccuracy,completenessorreliability.Thisreportor
presentationcannotbeusedbytherecipientforadvertisingorsalespromotionpurposes.
Thematerialmayincludeestimates,outlooks,projectionsandother“forward‐lookingstatements.”Suchstatementscanbeidentifiedbytheuseof
terminologysuchas“believes,”“expects,”“may,”“will,”“should,”“anticipates,”orthenegativeofanyoftheforegoingorcomparableterminology,or
bydiscussionofstrategy,orassumptionssuchaseconomicconditionsunderlyingotherstatements.Noassurancecanbegiventhatfutureresults
describedorimpliedbyanyforwardlookinginformationwillbeachieved.Actualeventsmaydiffersignificantlyfromthosepresented.Investingentails
risks,includingpossiblelossofprincipal.Riskcontrolsandmodelsdonotpromiseanylevelofperformanceorguaranteeagainstlossofprincipal.
“VERUSADVISORY™andanyassociateddesignsaretherespectivetrademarksofVerusAdvisory,Inc. Additionalinformationisavailableuponrequest.
September2019
PrivateEquityOutlook 41