![]() ![]() Overall funds raised declined year on year due to an apparent short-term discontinuity in the early months of the pandemic, but the prepandemic pace of fundraising returned by the fourth quarter (Exhibit 2). All things considered, it was a relatively strong year for PE fundraising.This time, most LPs seem to have learned from history, as investor appetite for PE appears relatively undiminished following the turbulence of the last year. During the global financial crisis (GFC) in 2008, many limited partners (LPs) pulled back from private asset classes and ended up missing out on much of the recovery. Please email us at: PE investors appear to have a stronger risk appetite than they did a decade ago. If you would like information about this content we will be happy to work with you. We strive to provide individuals with disabilities equal access to our website. We highlight several trends in particular: The most in-depth research continues to affirm that, by nearly any measure, private equity outperforms public market equivalents (with net global returns of over 14 percent). The strength and speed of the rebound suggest resilience and continued momentum as investors increasingly look to private markets for higher potential returns in a sustained low-yield environment (Exhibit 1). Private equity (PE) continues to perform well, outpacing other private markets asset classes and most measures of comparable public market performance. The year also saw a deeper focus for private markets firms on their people, the set of factors they consider when investing, and the ways they work. Following a second-quarter “COVID correction” comparable to that seen in public markets, private markets have since experienced their own version of a K-shaped recovery: a vigorous rebound in private equity contrasting with malaise in real estate a tailwind for private credit but a headwind for natural resources and infrastructure. We typically assess meaningful change in the industry over years or decades, but the COVID-19 pandemic and other events spurred reassessment on a quarterly or even monthly basis. ![]() The year 2020 was turbulent for private markets, as it was for much of the world. Meanwhile, diversity and new ways of working are central to a changing business environment. Private markets rebounded in 2020 after a turbulent first half, but performance varied by investment type. Leading firms continue to make major investments in digital and analytics capabilities across both front and back office to capture economies of scale as they grow.ĭownload Private markets rally to new heights to read the full report on which this article is based (PDF–9.0MB). Key lessons emerge as firms accelerate investment in digital and analytics. However, ethnic diversity is not yet broad-based, and diversity in general is lacking in the most senior roles, suggesting that firms continue to miss opportunities. US PE firms have increased the percentage of ethnically diverse talent and women holding junior-level roles, and have made strides in female promotion and retention. Private markets firms are making progress on diversity, but work remains. Considering climate risk in underwriting is now an imperative firms that do not run the risk of mispricing their investments. Firms can create value by transforming unsustainable business models into green ones and investing in companies scaling decarbonization technologies. Investors have become particularly focused on environmental sustainability, a potential win–win for private markets investors who support positive impact while driving returns. GPs and LPs continued to formalize environmental, social, and governance (ESG) commitments in 2021: over half of total fundraising-the highest percentage ever-flowed to firms with formal policies. The sustainability transition presents opportunities and risks-both substantial. Capital is increasingly flowing into subsectors that support the energy transition and digitization, such as alternative energy, clean-tech solutions focused on improving environmental sustainability, and “infratech.” Investors are also looking beyond physical assets at operating companies and technologies to generate value. Over the past decade, infrastructure’s mandate has evolved. In 2021, infrastructure and natural resources set all-time highs for fundraising, AUM, and deal volume indeed, global AUM broke the $1 trillion mark for the first time. Please email us at: than roads and bridges. ![]()
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