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5 th Annual European Fund Finance Symposium – 20 th June 2019 Christopher Elvin, Head of Private Equity Products Industry Development & Market Outlook

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Page 1: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

5th Annual European Fund Finance Symposium – 20th June 2019

Christopher Elvin, Head of Private Equity Products

Industry Development & Market Outlook

Page 2: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 2

• San Francisco• New York• London

• Bangalore• Singapore

• Manila• Hong Kong •Guangzhou

• Data, solutions and insights for alternative assets professionals.

• Over 80,000 subscribers across 26,600+ firms worldwide.

• Multi-award-winning service.

• Formed in 2003.

Private Equity

Venture Capital

Private Debt

Hedge Funds

Real Estate

Infrastructure

Natural Resources

About Preqin

Page 3: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

1.Where Are We Now?

Page 4: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 4

Global Alternative Assets AUM at a Record High – $9.8tn

522 577 646 706 778 892 921 999 1,066

1,193 1,338

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Sep-18

AUM

($bn

)

Global Private Capital AUM by Geographic Focus

North America Europe Asia ROW (exc Asia)

0

2,000

4,000

6,000

8,000

10,000

Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Sep-18

AUM

($bn

)

Global Alternative Assets AUM by Asset Class

Hedge Funds Private EquityReal Estate InfrastructurePrivate Debt Natural Resources

Page 5: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 5

Private Capital Fundraising ‘Slows’ From 2017 Highs but $838bn Raised Globally in 2018, $211bn focused on Europe

0

100

200

300

400

500

600

700

800

900

1000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019YTD

Annual Private Capital Fundraising by Asset Class

Private Equity Real Estate Infrastructure Private Debt Natural Resources

0

50

100

150

200

250

300

350

400

450

500

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019YTD

European Focused Private Capital Fundraising

No. of Funds Aggregate Capital Raised

Page 6: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 6

Steady Trend of Capital Flowing to Top Managers Signaling Increased Capital Consolidation

Page 7: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 7

Record Levels of Capital Available to Invest - $2.2tn

Page 8: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 8

Despite Challenging Deal Environment 2018 Saw Record Buyout Activity BUT… 2019 Has Shown Sign of Slowdown

-

20

40

60

80

100

120

140

160

180

0

200

400

600

800

1000

1200

1400

1600

1800

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 TD

2014 2015 2016 2017 2018 2019

Aggregate Deal Value ($bn)No

. of D

eals

North America Europe Asia Rest of World Aggregate Deal Value ($bn)

Private Equity-Backed Buyout Deals by Region, Q1 2014 - Q1 2019

Page 9: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 9

Similar Trend For European Venture, Real Estate and Private Debt Deals

0

5

10

15

20

25

30

0

500

1000

1500

2000

2500

3000

3500

2012 2013 2014 2015 2016 2017 2018 2019YTD

European Venture Deals

No. Deals Deal Value ($bn)

0

20

40

60

80

100

120

140

160

0

500

1000

1500

2000

2500

2012 2013 2014 2015 2016 2017 2018 2019YTD

European Real Estate Deals

No. Deals Deal Value ($bn)

0

10

20

30

40

50

60

0

50

100

150

200

250

300

350

400

450

2012 2013 2014 2015 2016 2017 2018 2019YTD

European Private Debt Deals

No. Deals Deal Value ($bn)

Page 10: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

2.Where Do We Go From Here?

Page 11: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 11

Preqin Predicts Alternative Assets Growth to Continue - $14tn by 2023

3.1

6.5

8.89.8

14

0

2

4

6

8

10

12

14

16

2008 2013 2017 Sep-18 2023

AUM

($tn

)

Alternative Assets AUM

Page 12: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com

Private Equity to Overtake Hedge Funds. Private Debt to Overtake Real Estate

Page 13: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 13

Growth to be Driven by Investor Demand – More than 12,000Active Institutional Investors in Alternatives

Page 14: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 14

The Role of Alternatives in a Low Return Environment

10% 10% 9%16% 10%

55%

64% 64%73% 61%

60%

37%

26% 26%18% 23% 29%

8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Private Equity Real Estate Private Debt Infrastructure NaturalResources

Hedge Funds

Investor Views on Portfolio Performance Over Past 12 months

Fallen short of expectations Met expectations Exceeded expectations

Median Public Pension Plan Returns by Asset Class

Page 15: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 15

Looking Beyond Sheer Returns: Investors are Using Alternative Assets for Many Reasons

Page 16: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 16

Private Equity & Private Debt

Private Equity: Diversify to Add High Risk-Adjusted and Absolute Returns

Private Debt: Diversify to Add High Risk-Adjusted Returns & a Reliable Income Stream

Page 17: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 17

Real Estate, Infrastructure, Hedge Funds and Natural Resources

Real Estate and Infrastructure: Diversify as an Inflation Hedge and for a Reliable Income Stream

Hedge Funds & Natural Resources – to Diversify to Reduce Correlation (& An Inflation Hedge For NR)

Page 18: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

3.How To Be Part of the Alternatives Industry in 2023

Page 19: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 19

Record No. of Funds in Market – 5,558 targeting $1.6tn

1,561 1,6191,845 1,949 2,098 2,235

2,6512,965

3,342

4,967

5,558

699 607 758 797 733 793 946 1,0081,206

1,523 1,573

0

1,000

2,000

3,000

4,000

5,000

6,000

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jun-19

Private Capital Funds in Market: 2010 to 2019

No. Funds in Market Aggregate Capital Targeted ($bn)

259

231

188

122

100

9

149

24

71 64 62

60

50

100

150

200

250

300

Private Equity Venture Capital Real Estate Private Debt Infrastructure NaturalResources

Europe-Focused Private Capital Funds in Market – June 2019

No. Funds in Market Aggregate Capital Targeted ($bn)

Page 20: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 20

Changes in Sources of Capital

32% 29%

9% 9%

30% 34%

31%

57%

38% 37%

60%

34%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

NorthAmerica

Europe Asia-Pacific EmergingMarkets

Fund Managers’ Projected Change in Level of Capital Sourced from

Each Region by 2023

Decrease Stay the Same Increase

-41% -30%-13%

-40%-16% -12% -7% -8% -7% -5%

9% 15% 26% 28% 38% 41% 44% 49% 50%65%

-50%

-30%

-10%

10%

30%

50%

70%

90%

Banks DB PensionFunds

DC PensionFunds

Fund ofFunds

Managers

PublicPensionPlans

PrivatePensionPlans

EndowmentPlans

Foundations SovereignWealthFunds

FamilyOffices

Fund Manager Views on Investor Types as a Source of Capital

Decrease Investment Increase Investment

Page 21: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 21

Investors Plan to Focus More on Specialists and Alternative Routes to Market

Page 22: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 22

Managers with ESG Policies Expected to Double by 2023

§ 79% of fund managers either have an ESG policy in place for alternative assets or plan to in the next five years

§ 67% of fund managers are implementing due to demand from LPs

§ Hedge fund managers may need to reconsider their stance on ESG

Alternative Managers Plans for ESG Policies

Page 23: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 23

Fund Managers May Need to Move Faster to Improve Diversity

Fund Managers and Investors with Diversity Policies in Place for Their

Workforce§ 56% and 60% of investors and fund

managers respectively believe a diverse workforce is beneficial to achieving investment objectives

§ Preqin research shows less than 18% and 19% of all roles at private equity and hedge fund firms are filled by women.

§ Over a quarter of investors either have or plan to have a diversity policy in place for hiring investment managers in the next five years

Investors with Diversity Policies in Place for Hiring

Investment Managers

Page 24: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 24

Invest in Technology and Data

§ Fund managers plan to use technology across their operations over the next 5 years

§ 89% and 75% of investors and fund managers respectively believe AI and machine learning will be more relevant to alternatives in 2023

§ 43% of fund managers are currently or plan to use big data processes in the next five years

Page 25: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

www.preqin.com 25

The Future of Alternatives

§ We expect alternative assets AUM to hit $14tn in 2023 – but given the tailwinds could go higher.

§ Driven by an evolving ecosystem of investors seeking yield and to diversify risks in portfolios, as well as new opportunities globally.

§ Investment focus will move away from the more developed markets as better opportunities become available in Asia and Emerging Markets.

§ And continued innovation by alternative managers leading to new products.

§ ESG and technology will continue to have significant impacts on the industry.

Page 26: Industry Development & Market Outlook ·  4 Global Alternative Assets AUM at a Record High –$9.8tn 522 577 646 706 778 892 921 999 1,066 1,193 1,338 -1,000 2,000 3,000

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