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The Research Pitch |
October 5, 2024
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Q3 data is in! We'll release our flagship US VC and PE reports next week, but you can get early access to the quarterly data in our Venture Monitor First Look and Global PE First Look.
September performance: US markets grew steadily last month following the Fed rate cut, but it will take time for private markets to feel the impact. To see returns data across a range of sectors and indexes, read our report.
Allocator Solutions: Our quantitative team has expanded our suite of private capital barometers. To gauge the current return environment and see historical examples of the barometers at work, read our free research. |
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Private markets go evergreen
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A structural shift is underway, reshaping how investors access private markets and how fund managers operate.
The traditional closed-end, drawdown limited partnership has been the vessel of the private asset management industry's growth over the decades, with an estimated $15 trillion managed in these structures today.
However, the oft-advertised 10-year model is increasingly rare, with many funds extending beyond that lifespan.
Slower distributions have led many institutional LPs—the pensions, endowments, and other large investors that have provided the fuel for private markets' growth—to run up against their exposure targets, and the pace of increasing those targets has slowed.
For fund managers, tapping into fresh sources of capital has become key for future growth. Increasingly, investment products are evergreen and semi-liquid in nature, features that are attractive to the undertapped, private wealth channel.
Global private wealth represents an estimated $450 trillion in net assets, and its relatively low allocations to private markets compared with institutional investors have many managers building new product offerings and forming partnerships to distribute to the channel. Trillions of dollars are expected to flow into private markets from individual investors and their advisors over the next decade.
Evergreen funds are gaining popularity as they provide continuous investment opportunities, offer simplified allocation management for investors, and allow for more exposure to compounding returns.
These new fund structures often provide diversification across strategies, geographies, and vintages, while mitigating the J-curve effect typically associated with private investments. They also provide enhanced liquidity options compared to traditional closed-end funds.
Fund structures such as tender offer funds, BDCs, REITs, and interval funds are playing a crucial role in the evergreen evolution. We have tracked over 200 fund launches targeting the private wealth channel over the past five years, and in total there are nearly $400 billion in net assets under management in these structures.
Investors should be aware of key differences in structure, fees, investment strategies, and liquidity profiles of these new funds, as there can be wide variation even within the same structure category.
In our new analyst note, we break down the common key characteristics and how they compare with old-school drawdown funds.
For fund managers, these new structures offer advantages such as more permanent fee streams, reduced pressure from fundraising cycles, and the ability to diversify their investor base.
Large, established firms are leveraging their brand recognition to launch new products tailored for the private wealth market. Simultaneously, technology platforms are emerging to facilitate access, and partnerships between traditional asset managers and private market specialists are forming.
This evolution is still in its early stages, with new product launches occurring almost weekly. As the industry continues to innovate, we can expect further developments in fund structures and accessibility, potentially reshaping the entire investment landscape.
Read more in the free note: The Evergreen Evolution
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Your roadmap for opportunity and risk after the US elections
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To equip our VC and PE clients ahead of the US presential election in November, our 14 industry and technology analysts have weighed in on which industries have the most to gain and lose.
In AI, the Biden administration's new regulatory apparatus faces divergence on the government's role in innovation, creating uncertainty for research labs on how to launch frontier models.
In healthcare services, we examine potential changes to Medicaid, which would impact the entire country, and Donald Trump's stated goal of weakening certain Affordable Care Act provisions.
In biotech, we review the Medicare Drug Price Negotiation Program—the Democrats' plan to further reduce drug prices (including $35 insulin) and Republican opposition.
And in climate tech, we discuss Trump's stated goal of reversing many of the benefits to clean energy (courtesy of the Inflation Reduction Act) and the feasibility of doing so (spoiler: it will be difficult).
We also share analyses on crypto, fintech, SaaS, gaming, agtech, industrials, space tech, medtech, and more.
Lastly, significant legislation largely gets passed when one party sweeps the White House and Congress. Case in point: Trump's tax cuts and Biden's IRA.
But a sweep may not happen. As a result, only bipartisan legislation would pass.
To prepare for these possibilities and more, keep our election guide on hand post-November 5.
Download it here: US Presidential Election Guide
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Thanks,
James Ulan
Lead Analyst, Emerging Technology |
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From healthcare to fintech to crypto, check out our tech team's take on AI's ever-evolving role in the VC ecosystem:
Read the free research
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VC valuations have come under pressure in recent years and growth rates have stalled.
Our research maps out various scenarios of how much aggregate unicorn value could be wiped out if the companies were valued in line with current market levels:
Read the free research
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Launch Report: Consumer Retail & Services
Buyout activity in the consumer retail and services industry is staging a rebound.
According to our brand-new report, which represents an expansion of our middle-market-focused industry research, PE deal count in the space during Q2 grew 31% YoY.
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| Click to access the full investor map. |
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But the sector is still grappling with challenges. Financial buyers are hesitant to make acquisitions, citing elevated borrowing costs and unfavorable valuations:
Read the free report
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Emerging Space Brief: AGI Research
Autonomous AI that can reason, problem-solve, and perform new challenges without task-specific programming seems closer than ever—yet still so far away.
Our brief explores this field known as AGI, or artificial general intelligence, which has attracted more interest and investment as models advance.
We dive into history, use cases, market outlook, and more:
Read the free brief
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A reminder of upcoming events:
Oct. 9: Our lead VC analyst Kyle Stanford is moderating two panels at SF Tech Week titled "Fundraising in Today's VC Environment." The afternoon session features Accel and Menlo VC, in addition to networking opportunities. The evening panel includes Khosla Ventures and Cyberhaven.
Oct. 14: Join us for our quarterly deep dive into the world of US leveraged loans and private credit. We'll dissect the trends, challenges, and opportunities that have shaped the year while discussing what lies ahead. Register here.
Oct. 16: What will drive the next phase of growth in Southeast Asia's private markets? You can hear from several industry professionals in the region during our live discussion. Register here.
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Our insights and data featured in the press:
- Discussing Q3 VC trends and OpenAI's massive round. [Bloomberg Technology]
- How some VC firms can create goodwill with their investors in this environment. [NYT]
- Since the end of 2023, funding costs have declined by about one percentage point for the average European LBO borrower. [FT]
- From 2015 to 2021, the number of unique investors in India nearly quadrupled, though the number is tracking much lower this year. [Business Insider]
- Healthcare IT investments have grown in importance for PE as the firms look away from care delivery. [Healthcare Dive]
- Why crypto VC funding is ticking up. [Forbes]
If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team.
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More of our recent research (* - report preview):
Market updates
Thematic research
Industry & tech research
Coming next week (subject to change)
- PitchBook-NVCA Venture Monitor
- PitchBook Benchmarks
- US PE Breakdown
- The evolution of primary care
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Since yesterday, the PitchBook Platform added:
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2232
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730
Companies
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37
Funds
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