{ "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": 34, "pageCount": 72, "prevPage": 33, "nextPage": 35, "slideType": "key_takeaways", "function": "summarize", "density": "overcrowded", "nDataPoints": 4, "notes": "This is a text-heavy report page from a Bain & Company Global Private Equity Report.", "elementsJson": [ "paragraph" ], "metadataConfidence": 0.9, "imagePath": null, "slideHref": "/slides/019dd923-5ca1-7489-b635-f31a406868d6/34", "deckHref": "/decks/019dd923-5ca1-7489-b635-f31a406868d6", "deckJsonHref": "/decks/019dd923-5ca1-7489-b635-f31a406868d6.json", "deckAnchorHref": "/decks/019dd923-5ca1-7489-b635-f31a406868d6#slide-34", "components": [ { "bbox": null, "kind": "callout", "text": "PE buyout funds outperformed the mPME tracking the S&P 500, the MSCI Europe and the MSCI All Country indexes on a one-year basis last year.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd951-b48d-72e7-ba6a-44157e204d9a", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "metric", "text": "IRR", "attrs": null, "subkind": "primary", "toolName": "Quantification", "toolSlug": "quantification", "confidence": null, "componentId": "019dd951-b48d-72e7-ba6a-4ac9e2305967", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.235, "w": 0.764, "x": 0.118, "y": 0.495 }, "kind": "paragraph", "text": "Now, however, following a succession of four strong years, PE returns have recovered their footing, and GPs and LPs have regained both confidence and a fresh perspective. Both short- and long-term results reflect PE's restored luster and GPs' justifiable claims to have been prudent stewards of their investors' capital. In all major markets during 2015, public equity markets were volatile and returns were flat or down, but PE returns cruised through the turbulence. Using the modified public market equivalent (mPME), a metric developed by investment advisory firm Cambridge Associates, it is possible to make an apples-to-apples comparison of PE returns with public equity returns by replicating the timing and size of PE investment flows—both purchases and sales—as if they had been invested in a basket of public equities. PE buyout funds outperformed the mPME tracking the S&P 500, the MSCI Europe and the MSCI All Country Asia indexes on a one-year basis last year: In the US and Europe, they were higher by 5 percentage points and in the Asia-Pacific region, by 6 percentage points.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "09f45254-8179-49de-8e44-9db4f5e24833", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.115, "w": 0.764, "x": 0.118, "y": 0.737 }, "kind": "paragraph", "text": "Short-term performance has received disproportionate attention since the downturn because PE's year-to-year gains or losses provide the first signals of economic recovery or setback. However, it has been PE's proven capacity to outperform over the long term that has made it the preferred destination for investment capital from LPs. The drop in public equity markets did put a dent in the longer-term performance of global buyout funds in 2015. Ten-year pooled IRR dipped slightly from 2013 and 2014 levels, and they trailed the S&P 500 mPME over three- and five-year time horizons. But returns remained attractive over a 10-year time horizon (see Figure 1.27), and their performance edge over the mPME index returns widens further over 15-, 20- and 25-year periods.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "350aa605-a294-42b8-85d1-daf73a4a6340", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.055, "w": 0.764, "x": 0.118, "y": 0.859 }, "kind": "paragraph", "text": "According to the most recent data, PE's 10-year returns to large public pension funds outpaced the S&P 500 by 3.7% net of fees. And as the legacy effects of the financial crisis retreat further into the past, PE should consistently perform at a level close to or above public equities over one-, three- and five-year time horizons as well—as buyout funds are currently doing in all major regions of the world (see Figure 1.28).", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "512d4a1b-f6c3-43d5-9684-0f13691f3296", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.135, "w": 0.764, "x": 0.118, "y": 0.161 }, "kind": "paragraph", "text": "The period immediately following the 2008 global financial meltdown was a time of anxiety about PE's ability to deliver market-beating returns. GPs had paid peak prices prior to the crash to acquire the assets held in their portfolios and rushed to mark them down sharply to their much lower prevailing market value. They put exit plans for their mature assets on ice and stretched out holding periods as they waited for the crisis to pass. Even top-performing GPs were not spared as first-quartile fund returns converged dangerously close to those of the public markets. Stunned by the deep and prolonged downturn and fixated on subpar short-term performance, worried LPs wondered when, if ever, they would see gains from their expensive PE investments.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "711e4109-58c9-481c-896a-cc734c364935", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.185, "w": 0.764, "x": 0.118, "y": 0.303 }, "kind": "paragraph", "text": "Even as the recovery slowly gained traction after 2010, doubts about PE returns persisted—for perfectly understandable reasons. Deferred asset sales had created a huge exit overhang that would take years to clear, adding to the pressures that would dampen returns. Market beta, the benign passive forces of economic growth, rising equity values and readily available low-cost debt had melted away, but many GPs had yet to demonstrate that they possessed the strategic and operational skills needed to generate alpha in its place. The lingering uncertainty hammered home the recognition that PE is an illiquid, long-term investment and that the PE industry had matured. The outsize returns GPs could earn on once-abundant undervalued assets had dried up. Leveraging their buyouts to boost equity returns was no longer working its magic. The industry was feeling the tugs of economic gravity that appeared to be pulling it down to earth.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "fcd6374f-9b2c-42e3-8680-392dd432d677", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.018, "w": 0.275, "x": 0.118, "y": 0.123 }, "kind": "title", "text": "Returns: Confidence regained", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "da27619d-37ee-49cd-9c52-a38db63a7f7a", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [ { "name": "Action Titles", "slug": "action-titles", "agent": "Architect", "layer": "slide", "matchId": "019dd95a-173e-703c-8769-593b9932c7c1", "evidence": "Section header 'Returns: Confidence regained.'", "confidence": 80 }, { "name": "Storytelling: audience calibration", "slug": "audience", "agent": "storyteller", "layer": "slide", "matchId": "ddd5726a-7a8b-4ed2-8fbc-db438eff3358", "evidence": "paragraph/paragraph: Now, however, following a succession of four strong years, PE returns have recovered their footing, and GPs and LPs have regained both confidence and a fresh perspective.", "confidence": 0.5 } ], "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": 38, "from": 15, "beatId": "019dd95a-07a5-761b-9143-9d47e22803da", "arcName": "The Consultant's Gambit", "arcSlug": "consultants-gambit", "beatName": "Problem & Complication", "beatSlug": "consultants-gambit-problem-complication", "evidence": "Pressures mount, multiples at record, debt tapering, exit backlog.", "position": 2, "confidence": 70, "parentBeatName": "Complication", "parentBeatSlug": "complication" } ], "loops": [ { "to": 37, "from": 34, "name": "Tale Two Worlds", "slug": "04-tale-two-worlds", "bestFor": "Competitive analysis, benchmarking, case for change", "matchId": "019dd95a-088c-724c-b312-5f4c71eda7b9", "evidence": "Buyout funds outperformed mPME on S&P 500, MSCI Europe, MSCI ACWI; LP satisfaction rose.", "position": 4, "objective": "Benchmark PE returns against public markets", "structure": "Current State -> Desired State / Benchmark -> The Gap & Implication", "confidence": 80, "description": "Show the gap between two states to drive urgency or highlight opportunity" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }