Private Markets Turn the Volume Down

April 16, 2023

“There’s no such thing as a good idea or bad idea in the investment world. It’s a good idea at a price, it’s a bad idea at a price.”

– Howard Marks

RESEARCH

McKinsey highlights key trends in private markets:

PE deal making slowed in 2H22 – Although PE deal volume and deal count declined by 26% and 15%, respectively, 2022 remained the second most active year on record.

Global fundraising declined – Global private markets fundraising declined by 11%, with fundraising in Asia & Europe declining by 39% & 28%, respectively. Since 2017, fundraising in Asia has declined 16% per year.

Capital flowed to the largest funds – Funds over $5 billion saw a 51% increase in capital raised in 2021, while sub-$5billion funds saw a 28% decline over the same period. First-time fund launches decreased by 40%.

PE buyout entry multiples declined – Buyout multiples fell from a record 13.2x EBITDA in 2021 to 12.9x in 2022, while public market multiples declined from 14.6x to 12.0x. Looking at individual subsectors, financial services and information technology experienced the largest multiple declines, while raw materials and resources saw multiple expansion due to rising commodity prices.

ESG tailwinds – ESG AUM exceeded $100 billion for the first time in 2022, and has grown at 35% per year over the past decade, far outpacing the rate of AUM growth in the broader private markets.

If we’ve entered a different macroeconomic regime for investing, where the traditional relationship between stocks and bonds has changed, what role Private Equity can play in a diversified portfolio? KKR believes that Private Equity, like Private Credit and Real Assets, can be additive to traditional portfolios, especially for investors who are concerned about inflation and/or do not face meaningful near-term liquidity constraints.

Bill Gates on the age of AI and why he believes AI is as revolutionary as mobile phones and the Internet.  Link

Meb Faber explains why it doesn’t matter if you don’t own any US stocks.  Link

An incredible story of how a gambler shocked casinos around the world by doing the impossible: beating roulette.  Link

Marc Rubenstein discusses the history and difficulty of short selling.  Link

Speaking of short-sellers, Jim Chanos shares his view of the market, why he’s shorting data centers & fintech stocks, and his current view on Tesla. Link

PODCASTS

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Kevin Kelly discusses his new book, Excellent Advice for Living: Wisdom I Wish I’d Known Earlier, why he’s optimistic about the future of technology, and technological advancement, and why he isn’t concerned about AI.

Peter Stella, Former Head of the IMF Central Banking Division, discusses the inner workings of the Fed, changes in the mortgage market over the past few years, and why fiscal policy, not just monetary policy, is a key driver of inflation.

Doomberg: Provocative Not Polarizing[3/28/23 – 54 minutes]Apple | Spotify | Google

Phil Bak speaks with Doomberg about entrepreneurship, content creation, and the secret to their writing process.

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