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Private Capital Update 3 rd Annual European Fund Finance Symposium Head of Private Equity Products Christopher Elvin 11 th October 2017, London
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Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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Page 1: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

PrivateCapitalUpdate3rdAnnualEuropeanFundFinanceSymposium

HeadofPrivateEquityProductsChristopherElvin

11thOctober2017,London

Page 2: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

www.preqin.com

AboutPreqinPrivateEquity&VentureCapital HedgeFunds RealEstate PrivateDebtInfrastructure Natural

Resources

SanFrancisco NewYorkLondon

HongKong

ManilaSingapore

Clientsincludeover44,000industryprofessionalsfrom16,000firms

MulRaward-winningservice

Dataavailableviaonlinedatabases,publicaRonsandresearchreports

Page 3: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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DefiniEons

Page 4: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

2017,SoFar….

Page 5: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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GlobalPrivateCapitalAUMataRecordHigh-$4.8tn(Mar-17)

116 134 155 185 217288

401

533 528584

654728

793

913 9391,016

1,0791,129

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

AssetsUnd

erM

anagem

ent($b

n)

NorthAmerica Europe Asia ROW

Europe-$1.1tn/23%ofTotal

Page 6: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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Europe-focusedPrivateCapitalFundraisingatPre-GFCLevels.$134bnraisedin2017YTD(asofOct)

41

3335

34

57

110

143

181 168

9266

79116

135 162156

195

134

0

100

200

300

400

500

600

700

800

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

AggregateCapitalRaised($bn

)

NorthAmerica Europe Asia RestofWorld

Page 7: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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ButCapitalisBecomingMoreConcentrated…$600mnAv.FundSizeofEurope-focusedvehiclesclosedin2017YTD(Oct)

0

100

200

300

400

500

600

700

0

50

100

150

200

250

300

350

400

450

500

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

Av.Fun

dSize($

mn)

AggregateCapitalRaised($bn

)/No.ofFun

ds

Europe-focusedPrivateCapitalFundraising,2000-2017YTD(Oct)

No.ofFunds AggregateCapital($bn) Av.Fundsize($mn)

Page 8: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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RecordLevelsofCapitaltoInvest-$408bn

5173

89 84 93

145

196

244266 270

244 250232

309329 332

369

408

0

50

100

150

200

250

300

350

400

450

Dec-00 Dec-01 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 Dec-16 Mar-17

DryPo

wde

r($b

n)

EuropeFocusedDrypowder

Page 9: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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EuropeanBuyoutDeals/Exits–SEllaSeller’sMarket

-

50

100

150

200

250

-

200

400

600

800

1,000

1,200

1,400

1,600

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017YTD

AggregateDe

alValue

($bn

)

No.ofD

eals

EuropeanBuyoutDeals,2006-2017YTD

No.ofDeals AggregateDealValue(bnUSD)

-

20

40

60

80

100

120

140

160

180

200

-

100

200

300

400

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600

700

800

900

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017YTD

AggregateExitVa

lue($bn

)

No.ofE

xits

EuropeanBuyoutExits,2006-2017YTD

No.ofDeals AggregateDealValue(bnUSD)

Page 10: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

Investors

Page 11: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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8,300+LimitedPartnersGloballyInvesEnginPrivateCapitalFunds

Europe28%

NorthAmerica48%

Asia14%

ROW10%

Page 12: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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InvestorPorfoliosBecomingEverMoreDiversified

Page 13: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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LimitedPartnerEvoluEon

Page 14: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

Performance

Page 15: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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PrivateCapital:NotImmuneFromLowerReturnEnvironment

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

1YeartoDec2013 1YeartoJun2014 1YeartoDec2014 1YeartoJun2015 1yeartoDec2015 1yeartoJun2016 1yeartoDec2016

Annu

alize

dRe

turn

RollingOneYearPrivateCapitalHorizonIRRs

Buyout

Venture

Mezzanine

RealEstate

DistressedPE

Infrastructure

Page 16: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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InvestorsLargelySaEsfiedwithHowFundsArePerforming…InComparisontoHedgeFunds

6% 6% 8% 11%24% 30%

55%

70% 73%80%

67%

59%56%

37%

25% 21%12%

22% 17% 15%8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

RealEstate Infrastructure PrivateDebt PrivateEquity VentureCapital NaturalResources HedgeFunds

InsRtuRonalInvestorsViewsonAlternaRveAssetPerformance

FallenshortofexpectaRons MetexpectaRons ExceededexpectaRons

Page 17: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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PrivateCapitalOutperformsintheLongTerm

0

50

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400

Dec-00 Dec-01 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 Dec-16Inde

xRe

turns(rebasedto100aso

f31De

c2000)

PrEQinPrivateCapitalQuarterlyIndexvs.S&P500

PrivateCapital S&P500Index

Page 18: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

Challenges

Page 19: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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PrivateCapitalManagersShareConcernsAroundDealPricingandFlow

PrivateEquity RealEstate PrivateDebt Infrastructure

DealPricing AssetPricing DealFlow AssetPricing

ExitEnvironment DealFlow CompeRRonfromNewManagers

DealFlow

Performance MarketVolaRlity DealPricing RegulaRon

KeyChallengesFacingFundManagers:

Page 20: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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InvestorsAgree

Page 21: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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FundManagersConfidentinFindingValue

Page 22: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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InvestorPerformanceExpectaEons

Page 23: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

Outlookfor2017

Page 24: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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Morethan636Europe-focusedPrivateCapitalFundsinMarkettargeEng$194bn

0

100

200

300

400

500

600

700

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Oct-17

Europe-focusedPrivateCapitalFundsinMarket,Jan2010toOct2017

No.ofFunds AggregateTargetCapital(BnUSD)

Page 25: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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FundraisingMoreCompeEEveThanEver&InvestorsAreFindingSourcingFundsMoreChallenging

Page 26: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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DistribuEonsConEnuingtoOutstripCall-UpsandDriveFundraising

-300

-200

-100

0

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 2016 Q12017

$bnPrivateCapital–CapitalCalled&Distributed,2000toQ12017

AnnualCalled($bn) AnnualDistributed($bn) NetCapitalDistributed($bn)

Page 27: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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InsEtuEonalPlansfornext12months

Page 28: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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AndFortheLongerTerm

Page 29: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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WhereareLPslookingtoinvest?

Page 30: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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KeyTakeaways•  EuropeanPrivateCapitalinrobusthealth–morestrategies,morefunds,moreAUM,moreinvestorsthaneverbefore.

•  FundraisinghighlycompeRRveandcapitalbecomingincreasinglyconcentrated•  Deal/exitacRvity-sRllaseller’smarket•  Clearcurrentconcernsoverdealpricing/valuaRonsandthelongertermimpactonperformance.

•  HoweverlongertermoutlookisposiRve:Ø GPsconfidentoffindingvalueØ MajorityofLPslookingtoincreaseallocaRonstomostassetclassesandputmoremoneytowork

Page 31: Private Capital Update - FundFinanceAssociation...Private Capital Outperforms in the Long Term 0 50 100 150 200 250 300 350 400 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

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FurtherInformaEon

[email protected]

FollowusonTwimer:www.preqin.com/Twimer

FindusonLinkedIn:www.preqin.com/LinkedIn

ChristopherElvin–[email protected]

•  Freereportsavailablefromwww.preqin.com/research

•  Preqin’sonlineservices:www.preqin.com/services


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