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Growth of PM AuM
Main Segment of PM
PE -> Blackstone & KKR
2020 – Year of disruption?
Industry:
Despite fundraising volatility in the first half of 2020, total AUM across private markets grew by 5.1% in 2020 to another all-time high of $7.3 trillion
Private equity segment:
Swiss PM
- growing with the largest share in PE (61%) in 2020. Private Equity constitutes an important part of the Swiss economy -> roughly 0.5% of Swiss GDP
Private Markets Vs. Public Markets
| Public Markets (e.g. equity, S&P 500) | Private Markets (e.g. private equity) |
Market | Centralized | Over-the-counter (OTC) -> relationship, negotiation |
Transaction Costs | Small | Enormous (due to lack of transparency) |
Valuation | Easy, objective, in real time | Difficult, subjective, available infrequently |
Liquidity | High | Low (longer lock-in period for money invested) |
Transparency | High | Low |
Horizon | Immediate | Long term (around 10 years) |
Contracts | Standard | Complex (funds and investors, company and investors etc.) |
Investors | Retail and Institutional | Institutional |
From the investor perspective -> diff btw PE and Public
(costs/fees, valuation, liquidity and transparency not so relevant)
From company perspective -> diff btw PE and Public
Listed investments have lower capital costs and more visibility but more disclosing and reporting requirements, which might not be attractive for very innovative companies
Definition of PM:
Most of the investments in private markets: via specialized funds
capital commitments
investors commit ex-ante to providing a given amount of capital over a fixed period of time
capital calls (or “draw downs”)
the quantity, amount and timing of capital calls (or “draw downs”) are uncertain at inception (the fund asks for capital as investment opportunities arrive)
LPA
The legal structure and key terms of fund define in the LIMITED PARTNERSHIP AGREEMENT (LPA) e.g. lifetime, fees, distribution waterfall etc.)
AuM in Private Markets Assets
7.3 trillion AuM worldwide in different types of private market assets (vs 47 trillion $ in Mcap of US market)
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