PE Pulse Quarterly insights and intelligence on PE trends Q4 2020
This document is interactive Contents topics covered orany PE-related issues. to any of the subject-matter contacts listed onpage 26onany of the trends inprivate credit andinfrastructure. Please feel free to reach out for private equity (PE)fundraising, acquisitions andexits, aswell as perspectives onboth recent developments andthelonger-term outlook into asuccinct anduser-friendly publication. The PEPulse provides professionals across EY memberfirmsanddistills thisintelligence capital market trends. Itcaptures key insights from subject-matter The iii. iv. ii. v. i. PE Pulse hasbeendesigned to helpyou remain current on 1. Private equity insights 1.i. Fundraising
Executive summary Current state Environment and horizon • Fundraising activity fell by 19% Despite the downturn, big funds got bigger in 2020. • Virtual fundraising is likely here to stay: One of the concerns in 2020, as the pandemic put Average fund sizes grew by 11%: heading into the pandemic was that in addition to challenges with many roadshows and investor deals, PE firms would have a hard time connecting with LPs to • PE firms raised US$776b during 2020, compared with meetings on hold. The amount conduct fundraising roadshows. For many funds, though, some shift US$961b in 2019. The number of funds closed dipped raised was the lowest in the last to virtual forms of fundraising could be permanent. Carlyle’s Kew Lee by 28% to 1,170 over the same period. was reported in a recent Pensions and Investments piece saying “... five years. having conversations that start in the morning with Korea, Japan • The US remains a key destination; 57% of the capital • Buyout funds accounted for 35% and China before moving on to Europe in the afternoon is something raised over the last 12 months is targeted at US of commitments in 2020. you couldn’t do ... in a world where you’re hopping on an airplane.” opportunities. One important caveat is that fundraising via Zoom is generally • Fundraising for secondaries • Average fund sizes saw an increase of 11% during thought to benefit larger, well-established funds more than smaller funds saw steep growth; 2020 to US$752m. or newer funds. Nonetheless, for many managers, integrating the commitments closed in 2020 best of virtual fundraising alongside existing practices could become were up 3.2 times from the • Fundraising for secondaries funds soared to US$82b a way of life. previous year. in 2020 from US$26b last year. Firms in the space are • PE AUM growth on track for US$9t by 2025: The growth of PE seeking to add another US$58b by next year. • ESG has gained significant assets under management (AUM) has been one of the defining relevance for PE investors. • Buyout dry powder rose by 9% during 2020 to features of the industry over the last decade. New research from Climate, governance, social US$865b, 44% of which resides with mega funds (size Preqin expects that growth to continue. Since 2010, PE AUM has value and carbon emissions greater than US$4.5b). grown from “just” US$1.7t to more than US$4.4t. Most importantly, have become recurring topics of after surveying investors in the asset class on their intentions for their portfolios, Preqin expects AUM to hit US$9.1t by 2025. Indeed, discussion among investors. nearly 80% plan to increase their allocations to private equity over • The legacy of the pandemic Dry powder — buyout funds by size (US$b) the next five years. More broadly, Preqin expects private capital AUM is expected to persist in Source: Preqin as a whole — which includes PE, private debt and other private asset fundraising, and increased classes — to climb from US$10.7t at present to more than US$17t dependence on collaboration by 2025. platforms, remote working • SoftBank, Carlyle and others join PE climate framework: ESG is an and virtual fundraising are area of significant and growing focus for PE. Last month saw several
integrating into the “new firms take additional steps to increase their commitment to driving normal.” social value when five PE firms came together to fight against