Side Letter’s sneak peek
Private Equity International will be publishing its preliminary full-year 2022 fundraising statistics this week, and Side Letter has gotten its hands on a sneak preview. Here are some key takeaways from the year that was:
- Fundraising fell by more than $100 billion last year to around $727.3 billion, from a record $829.8 billion.
- The number of funds closed last year fell by one third to 1,520 – the lowest total since 2016.
- North American funds accounted for a record share of global fundraising, at 46 percent.
- European funds, meanwhile, fell to 8 percent – the lowest proportion since 2012.
- Some 4,084 funds in market were seeking $1.15 trillion between them as of 20 January.
Keep an eye out for the rest of our findings over the next few days and our downloadable data presentation next week.
Whole hand in the game
At a time when GP-LP alignment is under the spotlight more than ever, skin in the game is the… name of the game. Swedish growth investor Monterro has taken this to a whole new level. The firm last week said it had held the final close on its small-cap fund, G1 Fund, on its €150 million target, with a whopping 24 percent GP commitment. A spokesperson for Monterro tells Side Letter that the firm has always made significant GP commitments to its funds as part of their culture of “pure alignment”. The €700 million Monterro 4, for example, had a 20 percent GP commit. Monterro is an outlier: just 2 percent of funds have a GP commitment larger than 16 percent, with the bulk of funds having between 3-5 percent, according to a survey by law firm Paul, Weiss last year.
Secondaries pricing for buyout, venture and growth, fund of funds and secondaries funds, and real estate fund stakes tumbled to a decade low last year, according to investment bank Greenhill. All strategies priced at double digit discounts except for infrastructure, which had a 3 percent average discount to net asset value. Across all asset classes, the average discount to net asset value was almost 20 percent.
“We see discounts, but the market is working,” Bernhard Engelien, managing director and head of European secondaries advisory at Greenhill, told attendees at the IPEM conference in Cannes last week. “We’ve seen very good level of buyside interest, so it’s been very selective and we see a lot of, for example, LP portfolios being sold as mosaics rather than to a single buyer.”
Engelien said market participants have indicated that Q4 marks, when they come out, are unlikely to be down on the prior quarter, and that discounts may ease as GPs become more realistic around valuations. Secondaries transaction volume hit between an estimated $100 billion and $110 billion last year, down 22 percent on 2021’s record $134 billion, Greenhill said. Over 100 active secondaries buyers expect transaction volume to rebound this year.
The Principles for Responsible Investment has relaunched its reporting framework to the market after a cool reception to its previous iteration, our colleagues at New Private Markets report (registration required). PRI has improved the clarity, consistency and applicability of its sustainability standards framework, which is designed to establish consistencies so that comparisons between different organisations can be drawn.
Several signatories of the PRI told NPM last year that they were unhappy with some of the previous questions, saying they either did not have the relevant data or were afraid they would be scored poorly for certain sections. The PRI has taken these concerns into account in its latest iteration, chief reporting officer Cathrine Armour said: “We’re looking to give [signatories] insight into how they’re performing [in terms of] processes and practices around responsible investment and where there is opportunity for improvement.”
The questionnaire is optional for signatories that have joined the PRI since the previous reporting cycle in 2021, and mandatory for those who joined prior to that. Private fund management giants that will be submitting their first mandatory reports include Ares Management, Brookfield Asset Management, Apollo Global Management and Vista Equity Partners – all of which joined in 2020.
Today’s letter was prepared by Alex Lynn with Adam Le, Carmela Mendoza, Helen de Beer and Madeleine Farman.