Globally, the number of companies that are beginning to implement ESG-related practices has decreased since the previous year, indicating that many companies are already well into their ESG journey. No investment should be made without proper consideration of the risks and advice from your tax, accounting, legal or other advisors as you deem appropriate. A pre-investment ESG diligence includes a materiality scan, ESG performance and benchmark, value-at-stake analytics, and an ESG maturity assessment. Overall, 41% of respondents say that their firms are in the early implementation stage, mainly focusing on using Customer Relationship Management (CRM) and digital platforms for reporting. Conversely, only 18% of North American respondents see it as a hindrance, the smallest percentage across all regions. It has been a positive year for ESG with a broad recognition of ESGs importance from all stakeholders and acknowledgement of its role in value creation. The median VC and growth funds lost 6.3 and 7.3 percent, respectively, through the first three quarters of 2022, while the median buyout fund earned 0.9 percent. S&P Global Market Intelligence. There was a notable drop in private debt deal volumes, driven by the slowdown in PE and only partially offset by market share gains taken from bank and syndicated financing channels (Exhibit 8). According to our latest Global Private Markets Review, private markets faced a year of two halves in 2022, with buoyancy in the first half and plummeting deal volumes, declining performance, and falling valuations in the second. Beneath these headline statistics, revolutions in energy, mobility, and digitization are changing the face of infrastructure investing. 2022 Diversity, Equity, and Inclusion Report. More than half of respondents (58%) highlighted it as the top risk factor to their portfolio. Morgan Stanley does not render tax advice on tax accounting matters to clients. Globally, fundraising fell 15 percent from the all-time high achieved in 2021 (Exhibit 3). Information regarding expected market returns and market outlooks is based on the research, analysis, and opinions of the investment team of the Private Markets Solutions Team. Globally, private equity generated $512 billion in buyout deal value during the first half of 2022, putting it on pace to produce the second-highest annual total ever (behind 2021's all-time record). 7 An efficient market is one where the market price is an unbiased estimate of the true value of an investment. McKinseys Private Markets Annual Review: 2017 to 2022. Counterintuitively, manager selection mattered less in 2022 than in years past: the interquartile spread of returns of PE funds narrowed in 2022 to 21.6 percent from the prior ten-year average of 33.8 percent. Investors flocked to the asset class because of its ability to provide stable cashflows, less correlated returns, and a hedge against inflation. 10 Morgan Stanley Research, Investor Presentation India Banks, November 11, 2022. Together, we achieve extraordinary outcomes. Its 2022, and were coming off an extremely busy year in private equity. 1981121. For some strategies, a contingency fee may be incurred in addition to the fee mentioned above. This has the knock-on effect of weakening fundraising, and we . After making an investment, GPs have five value creation levers they can pull to improve their portfolio: Pontus Averstad is a senior partner in McKinseys Stockholm office; Alejandro Beltrn is a senior partner in the Madrid office;Marcel Brinkman is a partner in the London office; Paul Maia is a partner in the New Jersey office; Gary Pinshaw is a senior partner in the Sydney office; David Quigley is a senior partner in the New York office, where Aditya Sanghvi is a senior partner; andJohn Spivey is an associate partner in the Boston office, where Brian Vickery is a partner. The number of IPOs in LatAm in 2021 was on par with 2020, a levelling out of the steep increases seen in 2019, with most of them taking place in Brazil. Compared with a heady prior decade of robust growth, 2022 was a subdued year in the private markets. MSIM, the asset management division of Morgan Stanley (NYSE: MS), and its affiliates have arrangements in place to market each others products and services. /marketintelligence/en/news-insights/research/2022-global-private-equity-outlook LPs concentrated commitments among large funds as many investors chose to re-up with known, tested names while forgoing commitments to smaller, newer managers. Outside the EU, MSIM materials are issued by Morgan Stanley Investment Management Limited (MSIM Ltd) is authorised and regulated by the Financial Conduct Authority. Many attributes of businesses located in Asia are well-suited to operational improvements that can both further growth and increase margins. Datenschutz By contrast, Asia-Pacific (APAC) respondents maintain the most cautious view. After more than doubling year over year in 2021, multifamily deal volume fell 29 percent in 2022, accounting for nearly half of the asset classs overall decline in deal activity. But ESGs growing impact on private markets goes beyond just dedicated funds and deals: most funds (of any strategy) now consider ESG risk factors in due diligence, and some explicitly include ESG concepts in their value creation plans. MSIMJ exercises the delegated authorities based on investment decisions of MSIMJ, and the client shall not make individual instructions. Office, retail, and hospitalitythe sectors most affected by pandemic-driven changes in working, shopping, and travelingshowed signs of emerging stability. 9 Source: AVCJ, data as of September 30, 2022. In the early 2000s, Chinas tech industry followed a copycat model, with consumers adopting technology that had proven successful in the U.S. In China, state-owned enterprises make up approximately 40% of GDP.12 These companies have traditionally been less nimble and commercially focused than their private counterparts, with many straightforward areas for operational improvement. Vikram Raju discusses five key findings from COP27. Unser aktueller Artikel aus der Reihe Tales from the Emerging World gewhrt Einblicke in neue Trends in den Schwellenlndern. While emerging Asian countries generally lag in terms of adoption of traditional banking products (e.g., credit cards),5 consumers in emerging Asia over-index on adoption of fintech products.6 Knowledge gains from more established regions can serve as the foundation for even better solutions in more emerging Asian regions. Across all regions, digitalization is high up on PE agendas and awareness has risen significantly. (As of 16/11/2021). Yet, like most private market segments, real estate experienced a downturn in 2022 compared with the record year it followed. The number of buyout and growth deals greater than $500 million decreased by 33 percent. Alle Morgan Stanley Investment Funds anzeigen, View All 1GT: Climate Investing Reinvented. [14], Private Equity firms gradually catching the digitalization train. Clients should always consult with a legal or tax advisor for information concerning their individual situation. This document is disseminated in Japan by MSIMJ, Registered No. Market Intelligence Performance also declined from 2021s high as lower marks offset current yield gains. LatAm investors especially seem to have accelerated the adoption of ESG principles: the number seeking investments in companies with a good ESG track record has nearly doubled from last year, to 43% from 25%, while the number of firms that are not considering ESG factors has decreased considerably, to only 7% from 19% in 2021. [11] S&P Capital IQ Pro Platform (as of 25/01/2022). PE/VC firms considering investment in the Consumer sector plan to focus on the Consumer Retail (24%) and Consumer Producers sub-sectors (18%), while taking rather a cautious approach to Consumer Leisure (8%). Source: AVCJ Research, as of 31 December 2022. The decline was most evident in Europe and Asia, while fundraising in North America increased slightly (Exhibit 1). This has played out among Korean tech companies where early-stage investments are limited to local VCs, keeping valuations modest. In closed-end funds, AUM reached a new peak, as it has every year since 2016, and managers raised the second-highest total on record, led by commitments to opportunistic vehicles. Example: 70% of all Europe-based investors responded that they are planning of making investments in Software & Services. Signs of a flight to quality, or at least to better-known managers, emerged. For those that can identify and partner with such private equity managers, there exists a promising opportunity for outperformance in the region. Since these charges and expenses are different depending on a contract and other factors, MSIMJ cannot present the rates, upper limits, etc. In Switzerland, MSIM materials are issued by Morgan Stanley & Co. International plc, London (Zurich Branch) Authorised and regulated by the Eidgenssische Finanzmarktaufsicht (FINMA). Since 2017, fundraising in Asia has declined 16 percent per year, driven primarily by reduced investment in China. While Asian private equity can be a difficult segment to diligence and access, MSIM believes that its 20+ year history investing in private equity funds and opportunistic investments in Asia, combined with the broader resources of Morgan Stanley, can help bridge this knowledge gap. Investing in Asian private equity comes with a unique set of challenges and risks beyond what this paper has explored. This material was not intended or written to be used, and it cannot be used with any taxpayer, for the purpose of avoiding penalties which may be imposed on the taxpayer under U.S. federal tax laws. Beyond robust GDP growth, under-penetration in many sectors creates opportunity for accelerated growth. 2021 was a record year for the PE industry as investment activity surpassed the trillion-dollar mark for the first time. Vintage years beyond 2017 have been excluded as performance is less mature and may be too early to tell. Deal volumes declined 27 percent as financing became more expensive and harder to access. Environmental issues and regulations, lack of financing and raw materials, logistics and high valuations are other topics of concern on investors minds. On average, 56% of respondents believe deal activity will improve in the next 12 months. Total private markets assets under management (AUM) reached $11.7 trillion as of June 30, 2022. Dry powder inventorythe amount of capital available to GPs expressed as a multiple of annual deploymentspiked. [2] Private equity managers expect another boom year in 2022. Despite this, stakeholders are expecting 2022 to be a year of action on ESG issues, not just for climate change as expected but also for rising concerns over social issues[10]. For example, while China tech was initially a copycat play, Chinas Internet sector has surpassed the U.S. in several areas (e.g., mobile payments, online shopping). [7] S&P Capital IQ Pro Platform (as of 27/01/2022). Economic environment at the forefront of risk concerns. Macroeconomic headwinds, including rising inflation and interest rates, coupled with negative public market performance (17.7 percent) triggered the aforementioned denominator effect, and LPs scaled down new commitments. Because of the deterioration in technology valuations, VC and growth equity returns led the fall, in stark contrast to the last several years. Retrieved from: https://www.spglobal.com/esg/insights/key-esg-trends-in-2022. Beyond localized operations, the ability to adapt to unique customs can be both a hurdle and opportunity. The pattern in 2021 and 2022 was no different: despite rising US Treasury (UST) rates, cap rates decreased and values rose. The contents of this material have not been reviewed nor approved by any regulatory authority including the Securities and Futures Commission in Hong Kong. Financial services (2.5 times) and information technology (2.2 times) recorded the largest multiple declines among PE subsectors, while rising commodity prices drove multiple expansion in raw materials and resources (+2.6 times). In the EU, MSIM and Eaton Vance materials are issued by MSIM Fund Management (Ireland) Limited (FMIL). Private markets deal volume plummeted, performance declined, and valuations felldramatically in certain sectors. He leads the Private Market team in shaping the strategic direction of the program, plays an active role in sourcing, monitoring of investments and serves on various underlying partnership advisory boards.s. Registered Office: 25 Cabot Square, Canary Wharf, London E14 4QA. 8 Source: Bloomberg, data as of February 28, 2023. Morgan Stanley Investment Management (MSIM) views private equity in Asia as a potential bright spot for investors that offers the opportunity for outperformance, particularly at the current juncture. These disruptions had substantial and varied impacts on private markets fundraising, performance, and AUM growth, with steep declines in certain regions and strategies, and pockets of resilience in others. S&P Capital IQ Pro. 2022 is likely to be an active year for private equity exits, and many investors are preparing to divest their portfolio companies. This can lead to less friction as industries grow. ASIAN BUSINESSES RIPE FOR PROFESSIONALIZATION The Covid-19 pandemic re-emphasized the importance of localized operations, as closed borders made it impossible for non-local managers to undertake transactions. Notably, 40% of respondents from North America and 26% from Europe claim that they dont face any major challenges, while only 11% of LatAm investors and 13% of Middle East investors feel the same. More private markets managers are incorporating considerations for ESG factors into their corporate policies, operating procedures, and investment decisions. The 2022 Global Private Equity Report: Market Overview 00:00 08:58 Today on Dry Powder, we'll cover the essential indicators of 2021, which can inform your strategy in 2022 and beyond. As measured by year-to-date IRR as of September 30, 2022, for global funds vintages between 2000 and 2019. Principles for Responsible Investment, annual report, 2022. The growth rate was lower Hong Kong: This material is disseminated by Morgan Stanley Asia Limited for use in Hong Kong and shall only be made available to "professional investors" as defined under the Securities and Futures Ordinance of Hong Kong (Cap 571).

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