{ "docId": "019dd923-5ca1-7489-b635-f31a406868d6", "docSlug": "ad48a7aff8040249", "documentTitle": "Global Private Equity Report 2016", "authorId": "Bain", "authorName": "Bain", "documentKindSlug": "consulting-deck", "documentKindLabel": "Consulting deck", "sourceTypeSlug": "strategy_consulting", "sourceTypeLabel": "Strategy consulting", "presentationDate": null, "orientation": "portrait", "aspectRatio": 0.773, "pageNumber": 14, "pageCount": 72, "prevPage": 13, "nextPage": 15, "slideType": "industry_trends", "function": "summarize", "density": "overcrowded", "nDataPoints": 4, "notes": "This is a text-heavy page from a Bain & Company report, focusing on two specific trends: shadow capital (coinvestment) and the secondary market.", "elementsJson": [ "paragraph" ], "metadataConfidence": 0.9, "imagePath": null, "slideHref": "/slides/019dd923-5ca1-7489-b635-f31a406868d6/14", "deckHref": "/decks/019dd923-5ca1-7489-b635-f31a406868d6", "deckJsonHref": "/decks/019dd923-5ca1-7489-b635-f31a406868d6.json", "deckAnchorHref": "/decks/019dd923-5ca1-7489-b635-f31a406868d6#slide-14", "components": [ { "bbox": null, "kind": "callout", "text": "Shadow capital invested in PE during 2015 totaled an estimated $161 billion, or the equivalent of 26% of the year's traditional capital raised.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd951-b48d-72e7-ba67-e1445ba74589", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "metric", "text": "shadow capital: $161 billion", "attrs": null, "subkind": "primary", "toolName": "Quantification", "toolSlug": "quantification", "confidence": null, "componentId": "019dd951-b48d-72e7-ba67-e4e9f69d2b9e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.035, "w": 0.764, "x": 0.118, "y": 0.125 }, "kind": "paragraph", "text": "Sweden, hiked its carried interest levy from 20% to 25% on the €210 million fund it recently closed. Valedo succeeded in closing its Partners Fund II, which was twice the size of its predecessor fund, in less than six months.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "30d20a65-e728-4798-bbaa-a318abdf19f5", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.155, "w": 0.764, "x": 0.118, "y": 0.615 }, "kind": "paragraph", "text": "Secondaries get a new look. Another novel way LPs are choosing to participate in PE is through their increasing use of the secondary market to deploy capital by actively trading shares in existing PE funds. Traditionally, the buying and selling of secondary interests has been the narrow domain of specialist funds created solely for that purpose. The extent to which LPs were active directly in secondaries had been to liquidate a stake in an established fund, either because they needed the cash or because they lost confidence that the GP would generate a hoped-for return. For their part, conventional LPs who bought secondaries often sought to take advantage of the steep discounts they could command, but when doing so they knew they had to take care to check under the hood of a fund that another LP was eager to sell.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "392ce4c0-8db0-48f4-beb8-212a3277993e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.165, "w": 0.764, "x": 0.118, "y": 0.775 }, "kind": "paragraph", "text": "Over the past few years, secondaries have almost entirely lost that stigma. In a recent report on PE liquidity, SEI, a US asset-management advisory firm, reported that 58% of LPs acknowledged having bought or sold assets on the secondary market. Indeed, trading in secondaries has become a potent portfolio management tool. In addition to allowing LPs to use uninvested capital to increase their exposure to PE, secondaries also enable them to better diversify their holdings across several fund vintages. The number of nontraditional buyers in the secondary market—a group that includes regular LPs looking to firm up their PE allocations—nearly doubled since 2013, to 485 last year. The increased use of the secondary market is helping to create additional liquidity in this traditionally illiquid asset class, and if the trend continues, could lead to a reduction in the “illiquidity premium” LPs have long expected in returns.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "57021409-c642-422c-8506-4cc04d9aa304", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.155, "w": 0.764, "x": 0.118, "y": 0.455 }, "kind": "paragraph", "text": "Alongside those undeniable benefits of being able to deploy more capital in PE at lower cost, however, come some real concerns. For instance, when a big chunk of nontraditional money from LPs is hidden in the shadows of a GP's new fund, other LP participants, typically smaller or midsize institutions, can be left wondering just how much capital the GP will ultimately need to put to work—and precisely whose interests the GP will end up representing. Yet, despite those potential frictions, coinvestments took a big step forward last year. On an annualized basis, shadow capital invested in PE during 2015 totaled an estimated $161 billion, or the equivalent of 26% of the year's traditional capital raised, according to a 2015 report by Triago, a leading PE industry fund-raising adviser.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "73b31e41-e883-47d0-bef0-ae73af8913c6", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.135, "w": 0.764, "x": 0.118, "y": 0.315 }, "kind": "paragraph", "text": "The expanding penumbra of shadow capital. Coinvesting alongside a GP is continuing to grow in popularity with LPs. This shadow capital does not figure in the totals raised by PE funds, but it is having a big influence on GP-LP relations and the evolution of the industry overall. LPs like coinvesting because anteing up additional capital can buy them access to an elite GP—or squeeze concessions from one with middling performance—by putting money in its new fund and then writing another check that lets the LP ride shotgun with the fund while paying a far lower fee to the GP, taking a smaller bite out of returns.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "ed89b053-d691-404c-aad1-23a457499fca", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.115, "w": 0.764, "x": 0.118, "y": 0.185 }, "kind": "paragraph", "text": "With so much capital vying to win a place in the new fund of a successful GP, many LPs are weighing new options for filling or increasing their PE allocations. Some are looking for ways to gain a coveted new-fund allocation while streamlining their portfolio management costs by agreeing to write bigger checks backing fewer GPs in exchange for more favorable fees and terms. That tactic is fine as far as it goes, which is too often not far enough in today's high-demand environment. That is why these LPs and many others are also turning to novel ways to invest in the PE space, beyond just signing on to a GP's new fund.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f64a4ad2-ecbd-464b-810b-b5aca2fd3134", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.018, "w": 0.33, "x": 0.118, "y": 0.152 }, "kind": "title", "text": "New PE plays for putting money to work", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "698cf719-f6b1-4f2c-9424-d002dd8e901d", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.015, "w": 0.39, "x": 0.305, "y": 0.058 }, "kind": "title", "text": "Global Private Equity Report 2016 | Bain & Company, Inc.", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "74afef79-6e9d-4ef0-a87f-809ebc5304fe", "frameworkName": null, "frameworkSlug": null } ], "metrics": [ { "metricRaw": "shadow capital", "numberRaw": "$161 billion", "numberKind": "money", "actionTitle": "New PE plays for putting money to work", "calloutText": "Shadow capital invested in PE during 2015 totaled an estimated $161 billion, or the equivalent of 26% of the year's traditional capital raised.", "numberScale": "b", "numberValue": 161, "metricFamily": "other", "numberCurrency": "$" } ], "tools": [], "frameworks": [], "arcBeats": [ { "to": 38, "from": 7, "beatId": "019dd95a-07a5-761b-9143-8cb5a7f43e6c", "arcName": "The Triple Take", "arcSlug": "triple-take", "beatName": "The Facts (What)", "beatSlug": "triple-take-the-facts-what", "evidence": "Section 1 'What happened' + key takeaways aggregating fund-raising, investments, exits, returns data.", "position": 1, "confidence": 85, "parentBeatName": "Setup", "parentBeatSlug": "setup" }, { "to": 14, "from": 5, "beatId": "019dd95a-07a5-761b-9143-9bb0473993b0", "arcName": "The Consultant's Gambit", "arcSlug": "consultants-gambit", "beatName": "Situation & Context", "beatSlug": "consultants-gambit-situation-context", "evidence": "'Heading toward a new normal?' + fund-raising baseline.", "position": 1, "confidence": 70, "parentBeatName": "Setup", "parentBeatSlug": "setup" } ], "loops": [ { "to": 14, "from": 7, "name": "Pattern Hunter", "slug": "02-pattern-hunter", "bestFor": "Time-pressed audiences, building consensus, when data is strong", "matchId": "019dd95a-088c-724c-b312-52734b0255eb", "evidence": "Multiple charts (small multiples on p.7, fund totals, LP allocations) build to 'fund-raising bigger, better, faster' conclusion.", "position": 1, "objective": "Establish 2015 fund-raising landscape via stacked evidence", "structure": "Evidence A -> Evidence B -> Evidence C -> Pattern/Conclusion", "confidence": 80, "description": "Group multiple pieces of evidence that together point to a pattern or conclusion" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }