Private Capital Research Newsletter - Preqin Insights+

Insights+

September 2023

●?Allocations at largest US pensions continue to grow

●?Infrastructure funds lead Europe's cleantech race

●?Where are we in the market cycle?

Two of our major regional reports, one on Europe and one on North America, launched this month. With private markets now a crucial area of investment in both regions, we examine how they’re holding up under current macro conditions. Preqin will be hosting a webinar to discuss some of the findings on September 20. To register, click here. Catch our very own Alex Murray, VP, Head of Real Assets, at SuperReturn Global Infrastructure in London on September 28, and Angela Lai, VP, Head of APAC and Valuations, at SuperReturn Asia in Singapore on September 19.

Largest US pensions favor private equity

US public pension average target allocations to private equity by quartile size

Large US public pension plans continue to fill the books of well-known, name-brand private equity funds, according to our brand-new?Alternatives in North America 2023 report. These allocations to mega-manager partners aren’t likely to slow, even if they pull back their overall commitments to private equity.? As of the 2022 plan year, the average target private equity allocation for the top-quartile pensions was 13%, up from 9% in the 2017 plan year. Preqin LP data shows that the average target allocation for most public pensions has increased since 2017, but more so for the largest plans. We say ‘most’ plans because there has been a flattening effect among the smallest plans in recent years. The bottom-quartile plans had an average private equity allocation of 7.2% for 2022 – little change from 7.9% in 2020. The good news for larger managers is that these high-asset plans continue to commit a larger portion of their assets to private equity, improving retention rates and stabilizing management fee revenue. The bad news for smaller plans, however, is that their access to fund managers could narrow. Download the full report today.?

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How decarbonization fundraising differs globally

Proportion of cleantech and renewable energy fundraising by asset class, 2005 – June 2023

Private capital is increasingly being invested in decarbonization. In Europe, investors are turning to even greater ticket sizes to stay in the game, based on analysis of average commitments to cleantech-focused funds. The average value of Europe commitments grew to €156.8mn in 2022, compared with €92.9mn for North America, according to Preqin’s latest Alternatives in Europe 2023 report.? However, not all asset classes benefit from this long-term redirection of capital. When fundraising is broken down by asset class and primary region focus, the prominence of infrastructure in North America and Europe is clear, while private equity and VC hold more weight in APAC-focused cleantech funds.? APAC's larger share of private equity and VC fundraising poses a challenge for the US and Europe. Traditionally, APAC has used private capital to invest in manufacturing decarbonization technology. As a result, the need to deploy this manufactured equipment in infrastructure projects has underpinned Europe’s reliance on the APAC region, primarily China, for the supply of critical decarbonizing technology. Download the report for a closer look at how Europe compares to other regions in private capital.

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Are we at the bottom of the market cycle?

Investors were asked: 'Where are we in the global market cycles?'

In our latest Investor Outlook, more than four-fifths (81%) of the investors surveyed said they believe we are starting to decline or approaching the bottom of both the macroeconomic and real estate market cycles. Are they correct? Let us know.? Meanwhile, their view on the equity market cycle is that it's further ahead, with 26% of respondents believing it's already on the start to a recovery. Among the same investors, private equity and VC are less favored this year as the exit environment and asset prices remain a challenge, but many remain bullish on the longer-term outlook. Uncertainty in markets has helped push private debt and infrastructure to the forefront of investors’ interest. Our survey found that they plan to deploy more capital to these asset classes over the next 12 months as the debt cycle and the effects of inflation add weight to both asset classes in the minds of investors.? Download the full report now.?

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Coming up...

Look out next month for The 2023 Preqin Private Capital Fund Terms Advisor, our Future of Alternatives update, and our Q3 2023 Quarterly Updates, all available exclusively to Insights+ subscribers. Enjoy the rest of your month!