PitchBook News - VC losses continue

Also: A strong start for markets in January; Information security remains a priority; Live discussions this week on US VC trends + PE and primary care
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The Research Pitch
February 4, 2023
Presented by RSM
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Talking primary care: We're hosting a live conversation Wednesday with senior strategists from Optum to discuss how PE firms can navigate the growing Medicare Advantage market. Register here.

US VC trends: Where are investors finding pockets of opportunity? What's the outlook for exits and fundraising? Our panel will discuss it all Thursday in our Venture Monitor webinar. Register here.

Top three: In case you missed them, here were our most-read analyst notes from January:
 
VC, PE losses persist in new data, but other strategies show resilience
Due to the vagaries of private market reporting, we've been waiting several quarters to see when the public and private markets would come back into some sort of alignment.

Venture first began to capitulate in Q1 2022 with a quarterly decline of 5%, but these funds also had the most significant unrealized write-ups in 2020 and 2021, and so had further to fall. Q2—and it appears Q3—were both negative for venture, as well.

PE quarterly returns first turned negative in Q2 2022 and look to have extended the losses into Q3, based on our preliminary data. By contrast, real assets, real estate, and secondaries have shown resilience and are yet to report a negative quarterly return since the height of the pandemic.

One interesting aspect of the turn in performance is that, while no one likes negative returns, the pullback in private market performance may be a relief in some circles.
 
Preliminary Q3 data shows PE and VC performance in the red.

In 2022, the delay in private markets following the public market downturn caused significant angst for LPs, as, on paper at least, they found themselves overallocated to the assets whose values had not yet declined.

Many allocators who felt this denominator effect during the global financial crisis made adjustments that allowed either a wider drift from targets or more time to be out of compliance with policies so the private market allocations could have a chance to realign to a new valuation regime.

Yet the effect was still a big topic of conversation in 2022, as secondaries buyers hoped LPs would be offering up stakes in an attempt to get back to targets, and GPs fundraising got the cold shoulder from LPs who did not want to push their overallocation further away from targets.

The markdowns that have taken place may have taken some of the pressure off LP portfolios, but some separation between public and private market valuations appears to remain.

Whether the gap will be closed by public markets rising or private markets falling—or somewhere in the middle—remains to be seen.

For more data and analysis, download our free Global Fund Performance Report.
 
Best,

Hilary Wiek, CFA, CAIA
Senior Strategist, Fund Strategies & Sustainable Investing
Share: Email LinkedIn Twitter Facebook
 
Market Updates  
 
Global markets kicked off January strong after a challenging end to 2022.

Central banks are starting to see a stickier enemy in the battle against inflation-housing services. And while progress against headline inflation has been made by many central banks, inflation in services indexes will hold leaders to their promises of elevated rates through 2023.

Our Global Markets Snapshot—now with data on global real estate trends—breaks down a month of trends in the equity, debt, and commodities markets, tracking returns across a range of indexes and sectors.

It also features private markets activity, including major deals, fundraising, IPO performance, lending volumes, and unicorn creation:
get the free report
 
 
Emerging Tech Research  
 
As companies tighten their budgets, one category of enterprise software has held steady: information security.

The vertical is a priority for governments, as well; the US recently passed an act requiring that federal agencies prepare for attacks from quantum computers.

Even with this support, growth for information security startups has been limited, and the number of VC deals stayed flat in Q4. For now, debt financing and take-private deals for proven companies have stood out as notable dealmaking trends.

We drill deep into the data in our new Information Security Report and uncover emerging opportunities in AI and machine learning, outsourced threat monitoring services, and quantum computing:
read a free preview
 
 
Webinars & Events  
 
What is SFDR and who will be most affected by it?

How long does it take to go through the process end-to-end and how do I get started?

We partnered with Proof in a live discussion to examine this upcoming EU regulation for disclosing ESG metrics and performance:

Watch the replay
 
In the News  

Our insights and data featured in the press:
  • The days of sky-high valuations and easy fundraising opportunities are gone. Sentiment in the VC space has been crushed and capital has dried up. [Fortune]

  • VC investment in autonomous vehicles companies during Q4 plunged 47% on an annual basis to $1.4 billion. [Reuters]

  • By 2027, managed assets in the global private capital market are expected to climb 20% to $13 trillion from 2021 levels. [Bloomberg]

  • Two segments in the healthcare market that are too overcrowded: Patient engagement and clinical documentation. [MedCity News]
If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team.
 
ICYMI  

Highlights from our other recent research:

Market updates
Thematic research
Public comp sheets and valuation guides
Coming next week (subject to change)
  • US VC Valuations Report
  • Quantitative Perspectives: US Market Insights
  • Healthcare Services Report (sneak peek!)
  • ETR: Agtech*
  • Introducing PitchBook's Patent Research
 
A message from RSM  
How next-gen fund administration services elevate operations
Private equity firms face multiple challenges that threaten to impact operational performance and reduce their competitiveness. Fund managers cannot afford to shift focus away from their core responsibilities, making outsourcing back-office functions more critical than ever.

Navigating the complexities facing the industry—from evolving regulations and reporting requirements to complicated fund structures—calls for comprehensive fund management that adds value beyond traditional administrative services.

RSM’s newly released guide explores:
  • The most pressing issues affecting private equity firm operations and performance
  • How fund management plays a critical role in achieving operational alpha
  • Six critical capabilities of a best-in-class fund management solution
Access here
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