Private Capital Markets
Weekly Chart Spotlight
Our private markets observations based on the world’s largest private market data ecosystem of over 12,500k funds, 125,000k+ portfolio companies and 2,000,000 proprietary cash flows.
Our private markets observations based on the world’s largest private market data ecosystem of over 12,500k funds, 125,000k+ portfolio companies and 2,000,000 proprietary cash flows.
July 23, 2024
Deal Level Due Diligence: Operational Analysis
The chart above shows that in 2008, total debt rose further due to costly mezzanine financing, at the expense of equity. During the 2009-2011 financial crisis, new investments had higher equity ratios. More recently, investments have become more aggressive with increased leverage. Reviewing operational growth reveals whether a GP can increase sales and EBITDA through active management. Comparing financing structure with operational growth helps assess the attractiveness and health of portfolio companies. Analyzing EBITDA is crucial for mature companies funded through buyouts or growth equity: increases in EBITDA lead to higher exit valuations and investment income.
July 12, 2024
Deal Level Due Diligence: Scrutinizing Risk and Return
This week's chart displays the total value to paid in capital (TVPI) performance attribution from an example manager. This visualization of distribution can serve as a health check for the portfolio. A large proportion of deals have TVPIs greater than 1.0, which indicates that many investments are at least returning the initial capital invested, which is a positive sign. Conversely, 7 deals in this example manager have TVPIs less than 1.0, which reflects underperformance. Evaluating this, alongside other performance measures, such as pooled and capital weighted means, and additional metrics like internal rate of return (IRR) and distributions to paid in capital, should be done to fully understand a GP’s deal level return profile.
July 4, 2024
Fund Level Due Diligence: Differentiating Between Opportunities
The J-curve chart depicts a fund’s historical and expected liquidity, illustrating the manager's ability to manage assets and cash flow through different market phases. It reveals actual investment returns and risks by comparing portfolio company cash flows with net investor cash flows, accounting for fees, expenses, and carried interest. Since general partners can influence these factors, it's crucial for limited partners to distinguish between returns from asset performance and those from financial maneuvers.
June 27, 2024
US Tech Deal Spotlight
(1) Post-GFC (Global Financial Crisis), tech deals have shown a clear division between winners and losers. (2) The period from 2009 to 2022 experienced significant pricing multiple expansion due to a favorable monetary environment. (3) Tech deals made in 2021 stand out for showing the weakest returns, reflecting potential overvaluation or adverse market conditions at that time. (4) However, more recently, there has been a noticeable drop in deal pricing. This adjustment in pricing, coupled with a rebound in returns, suggests a correction in the market and is interpreted as a positive sign, potentially indicating more sustainable and realistic valuation levels going forward.
June 20, 2024
US PE-backed Company Revenue CAGR by Investment Year
The chart illustrates a trend of (1) increasing average revenue growth for private equity (PE)-backed companies, starting from the aftermath of the Global Financial Crisis (GFC). This upward trajectory highlights a steady improvement in revenue growth rates over the years. (2) A significant acceleration in revenue growth is observed from 2016 onwards, culminating in a peak in 2020, where the compound growth rate surpassed 50%. (3) Despite a decline in growth rates for deals made in subsequent years, these rates continue to be robust and historically strong. This suggests that while the peak growth witnessed in 2020 has not been maintained, PE-backed companies are still experiencing healthy revenue growth in recent years.
June 13, 2024
US PE pricing multiples by sector
The chart illustrates several significant trends in deal pricing across different sectors over time, highlighting the effects of major economic events and shifts. (1) In the consumer sector, prices remained stable for 15 years but peaked during the COVID-19 pandemic, only to revert to levels from a decade prior. (2) The healthcare sector, consistently popular, saw a post-COVID surge in deal prices, which quickly fell back to pre-pandemic levels. (3) In the tech sector, pre-GFC pricing was viewed as unsustainable, a concern that proved accurate during the financial crisis. (4) Post-GFC, a benign credit environment coupled with a substantial increase in money supply led to inflation in deal prices across all sectors.
June 7, 2024
US deal default rates by stage
The chart illustrates that (1) venture capital (VC) defaults peaked in 2009 following the Global Financial Crisis (GFC). (2) During the GFC, default rates for VC, buyout, and growth deals converged. (3) By 2009, defaults had returned to normal levels, with VC defaults at 45% and buyout/growth deals at 20%. (4) A general trend of decreasing defaults continued through 2020. (5) However, the onset of the COVID-19 pandemic led to a significant reversal, with default rates surging back to crisis levels. This suggests that while the financial markets had stabilized post-GFC, they were still vulnerable to large-scale disruptions such as the pandemic.
May 30, 2024
US private equity performance by stage
The chart highlights the performance trends of different investment strategies post-Global Financial Crisis (GFC). (1) Venture capital (VC) saw unprecedented returns for deals made in 2012, but these returns have declined since then. (2) Growth deals rebounded significantly in 2010 but have displayed more volatility compared to other strategies. (3) Buyouts were somewhat impacted by the GFC and have shown a muted recovery. (4) All strategies have followed a negative trajectory since 2017. Overall, the GFC created a favorable environment for deals, with Growth and Venture strategies benefiting the most.
May 23, 2024
US private equity deal performance and pricing
The chart illustrates the post-Global Financial Crisis (GFC) landscape with a swift V-shaped rebound in pricing after an initial dip (1), reaching unprecedented levels by 2022 (2) before softening in 2023. Despite this, (3) subsequent deals continued to yield exceptional money multiples returns, indicating resilience in investment profitability. However, (4) an overall downward trend in pricing, interspersed with occasional recoveries, alongside a general decline in returns over the analyzed period, suggests market volatility and challenges for investors amidst changing economic conditions. The chart underscores the importance of navigating the evolving financial landscape with adaptability and strategic decision-making to capitalize on opportunities while managing risks effectively.
May 16, 2024
Deal IRR by Total Debt/EBITDA
This analysis highlights the vital role of cash flow data in private market investments, offering insights into real returns, risk assessment, liquidity management, and performance evaluation. By focusing on deal cash flow data and operational metrics rather than leverage, investors gain clarity on wealth impact and can monitor portfolio company health, anticipate liquidity needs, and evaluate fund performance against objectives. Additionally, it enables flexible and thorough analysis at various levels, emphasizing the importance of cash flow data in informing investment decisions and optimizing performance in private markets.
May 6, 2024
Real Estate Funds Portfolio - Occupancy rate vs Net Operating Income
By analyzing historical trends and operational metrics, investors can forecast future performance and identify areas for improvement within portfolio companies. Access to accurate quarterly data, particularly in sectors like commercial real estate, empowers investors to anticipate market shifts and adjust investment strategies accordingly, mitigating risks and maximizing returns. This proactive approach contrasts with relying solely on General Partner reports, which may lead to missed opportunities and late reactions to market changes.
April 26, 2024
Debt Pricing by Deal Tranche Class by Percentage
Debt tranches are typically categorized based on their priority of repayment and associated risk levels. The pricing of each tranche class by percentage reveals the market's perception of the risk associated with each tranche. As noted within the chart, higher-priced tranches typically represent higher-risk positions, while lower-priced tranches indicate lower risk. For example, the higher interest rates associated with mezzanine debt reflect its increased risk compared to senior debt, including subordination, lack of collateral, hybrid nature, and higher leverage levels. These factors contribute to the pricing of mezzanine debt and help compensate lenders for the additional risk they assume.
April 19, 2024
Deal Default Analysis by Investment Year
Embarking on a journey through time, the Deal Default Analysis chart serves as our compass, guiding investors through the peaks and valleys of investment risk. Reflecting the percentage of deals defaulted over time, calculated from the total number of deals with a TVPI less than 1, this tool aids in assessing investment risk. Clear spikes in 2007/2008, 2019, and 2022 signal challenging economic and market conditions, reminiscent of the Global Financial Crisis and subsequent tumultuous periods. In navigating these turbulent waters, understanding risk is paramount for investors seeking safe harbors amidst uncertainty.
April 11, 2024
Financing Structure at Entry by Investment Year (Median)
The Financing Structure at Entry by Investment Year (Median) chart serves as a critical gauge for finance professionals, offering a comprehensive view of a company's financial dynamics over time. By analyzing the distribution of equity and debt at the point of investment across different years, investors gain valuable insights into the company's debt management strategies, its capacity for financial agility, and its overall financial robustness. This metric enables investors to assess the company's ability to navigate debt levels effectively, maintain flexibility in capital allocation, and sustain its financial health throughout its growth trajectory, thereby informing investment decisions and risk management strategies with a deeper understanding of the company's financial landscape.
April 4, 2024
US Deal Default rates by stage 2005-2023
In the wake of the 2008 Global Financial Crisis (GFC), venture capital defaults surged to a peak in 2009 (1), marking a turbulent era for investors. However, post-crisis, a semblance of stability emerged as defaults converged (2), offering a glimpse of recovery. By 2009, default rates for VC and Growth deals normalized to 45% and 20% respectively, signaling a return to equilibrium amidst ongoing efforts to mitigate risks. A steady decline in defaults ensued, guiding the industry towards resilience. Yet, the onset of the COVID-19 pandemic in 2020 unleashed a fresh wave of uncertainty, pushing defaults back to crisis levels (3). As financial professionals navigate these stormy waters, the tale of VC defaults underscores the cyclical nature of the market and the imperative of adaptive strategies in times of crisis.
March 26, 2024
TVPI & Revenue CAGR vs EV/EBITDA 2005-2023
The Great Financial Crisis (GFC) brought a sharp pricing dip, swiftly followed by a V-shaped recovery (1). Subsequent deals delivered outstanding returns and stable revenue growth (2). In 2019, revenues surged, peaking in 2020 (3). However, from 2020 to 2022, pricing reached unprecedented levels while money multiples dipped, alongside a downward trend in revenue CAGR (4). Amidst these fluctuations, the financial sector's resilience and adaptability endured, navigating through the complexities of the economic landscape.
Latest Insights
Private Markets Rebound: Why Effective Due Diligence is Mission Critical
After two years of stagnation, private investors (LPs) are eager to deploy new capital. Activity is rising, but in today’s volatile market, disciplined due diligence is vital. Selecting the right General Partner (GP) and understanding their return strategies across economic cycles are more critical than ever.
Dive into our whitepaper to strengthen your investment approach and ensure you navigate these challenges successfully.
Private Equity Asset Allocation Models: Why High-Quality Data is Paramount
Private equity asset allocation models are sophisticated frameworks used by investors to strategically distribute their capital across different types of assets within the private equity universe. Asset allocation decisions involve determining the appropriate mix of investments across various asset classes, such as venture capital, growth equity, and buyouts, as well as considering factors like industry focus, geographic allocation, fund type, risk management strategies, and liquidity considerations.
Benedikt Hoefelmayr interviewed at BAI AIC 2024
Watch Benedikt Hoefelmayr's full interview at BAI AIC on Private Equity Liquidity Management in times of ELTIF2.
Private Markets Rebound: Why Effective Due Diligence is Mission Critical
After two years of stagnation, private investors (LPs) are eager to deploy new capital. Activity is rising, but in today’s volatile market, disciplined due diligence is vital. Selecting the right General Partner (GP) and understanding their return strategies across economic cycles are more critical than ever.
Dive into our whitepaper to strengthen your investment approach and ensure you navigate these challenges successfully.
Private Equity Asset Allocation Models: Why High-Quality Data is Paramount
Private equity asset allocation models are sophisticated frameworks used by investors to strategically distribute their capital across different types of assets within the private equity universe. Asset allocation decisions involve determining the appropriate mix of investments across various asset classes, such as venture capital, growth equity, and buyouts, as well as considering factors like industry focus, geographic allocation, fund type, risk management strategies, and liquidity considerations.
Benedikt Hoefelmayr interviewed at BAI AIC 2024
Watch Benedikt Hoefelmayr's full interview at BAI AIC on Private Equity Liquidity Management in times of ELTIF2.