Global PE sees fundraising, performance contraction - McKinsey

An eight-year run of consecutive increases in private equity fundraising was broken by pandemic-impacted 2020. A sharp rebound in 2021 could not be sustained as the 2022 total fell to USD 665bn. On a geographic basis, the pain was most keenly felt in Asia, where fundraising fell 49.2% year-on-year compared to declines of 1.5% in North America and 31.9% in Europe.

Commitments to VC and growth strategies in North America rose as the buyout total fell, but there was still evidence of gravitation to larger funds. This played out globally as well, with the largest 25 managers accounting for 42% of capital raised. This compares to an average of 36% over the past decade. Managers outside the top 250 received 19%, the lowest share since 2014.

Global private equity assets under management rose to USD 7.6trn, continuing a five-year upward trend, while dry powder reached an all-time high of USD 1.9trn.

Investment activity fell 26% to USD 2.4trn – still the second most active year on record as a strong first half was followed by a drop-off in the second half. Median global EBITDA multiples for buyouts declined to 12.9x from the all-time high of 13.2x posted in 2021, although the drop in public market multiples was sharper (14.6x to 12x). Debt-to-EBITDA multiples for US buyouts remained at 6.9x.

For the first time in six years, private equity was not the highest-performing private markets asset class. It was the only asset class to lose money as of September 2022, recording a nine-month trailing pooled net IRR of -9.2% for 2000-2019 vintage funds. Venture capital and growth strategies were weakest, posting IRRs of -14.9% and -14.7%. Buyout returns were -6%.

However, the drop-off in private equity was still less than that of public markets, while long-term performance remains strong. The 15-year median net IRR for 2009-2-19 vintage funds was 20.1% as of September 2022, beating other private markets asset classes.

The report identified private debt and infrastructure as brighter spots. Private debt fundraising continued to grow, and deployment opportunities increased in the second half of the year as bank financing for private equity deals dried up. Infrastructure and natural resources fundraising reached an all-time high of USD 158bn with the emergence of more mega-funds.

The report also noted that private markets firms still have work to do on diversity. Looking at North America alone, private markets compare favourably with the corporate space on some diversity metrics, but ethnic diversity is not yet broad-based. Ethnic, racial, and gender representation also remains imbalanced in senior positions and investing roles.

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• Topics
• North America
• Europe
• Fundraising
• Investments
• Performance
• Asia
• McKinsey & Company