PitchBook News - It's here: Our Private Equity Barometer

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The Research Pitch

March 27, 2021

A brand-new way to score the PE returns environment

We're hiring! If you have research experience, our Emerging Technology Research team is expanding its coverage to include climate and energy tech. We're also looking to bring on a private equity analyst.

Reminder: We're running our annual Institutional Investor Survey and invite all limited partners to share their insights. Thanks!

Introducing PitchBook's PE Barometer

Private equity's infrequent performance reporting, combined with delayed mark-to-market valuation practices, can obscure the asset class's true relationship to the macro environment.

To address this issue, our recently unveiled Private Equity Barometer leverages advanced statistical techniques to clarify those relationships, allowing investors to track economic and market developments and objectively assess what's driving PE returns.

The PE Barometer distills information from nine macro, credit, and equity indicators into a single score that explains 62% of the variation in PE returns since 2001.

What's more, the R² value jumps to an impressive .77 in more recent periods, indicating that our model explains 77% of the variation in PE returns since 2008.

Additionally, the relationship between PE returns and the Barometer increased during periods of elevated volatility. This has important implications for multi-asset portfolio construction and risk management because overall risk also tends to be concentrated in the same factors in traditional asset classes.

On an ongoing basis, private market investors can use the Barometer to track key indicators and objectively relate them to PE returns. This assessment can be done monthly rather than quarterly with a shorter lag time than traditional PE fund reporting cycles.

In two pieces of quantitative research released this week, we explain how the PE Barometer is constructed and then use it as part of a data-driven narrative on how PE fits into the broader macro landscape:

"Private Equity Barometer: Scoring the state of the PE return environment"

Download our analysis: "US Private Equity: Resilience in Unprecedented Times"

We encourage PitchBook clients to reach out to their account managers or our institutional research team to learn more.

Best,

Daniel Cook, CFA
Head of Quantitative Research

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Market Updates

Overall, real estate investors closed fewer funds in 2020 than in any year following the global financial crisis. They also raised the least capital since 2013.

Our inaugural Global Real Estate Report analyzes the broader macro environment but also dives deeper into performance by sub-strategy, revealing that some areas like industrial property had very positive results.

How will the market recover from recent disruptions and adjust to long-term structural changes?

How will distressed opportunities and advances in real estate technologies factor into play?

read the report

Thematic Research

Venture Debt a Maturing Market in VC — Venture debt is booming, with VC-backed companies in the US taking on $80 billion+ in loans and other debt products over the past three years, writes analyst Kyle Stanford.

Overall, the data shows that debt is growing faster than the broader VC market, and the largest proportion of venture debt goes to tech companies:

download the note

Emerging Tech Research

FINTECH: Of all emerging tech sectors we cover, fintech has been the most-funded and fastest-growing over the past decade.

We've seen that incredible growth in the meteoric rises of companies like Stripe, Coinbase and Robinhood, and evolving technologies continue to offer long-term and lucrative opportunities, analyst Robert Le writes.

Why have fintech startups been stepping up their pursuit of banking licenses?

Why are incumbents increasingly partnering with and investing in their younger competitors?

What's the latest in banking-as-a-service?

Download our latest fintech research

Webinars & Events

Dry powder. Nontraditional investors. SPACs.

There are many different factors leading to a flood of capital available in the venture market.

What has that done to valuations by stage and sector? How does that compare between the US and Europe?

Venture analysts Cameron Stanfill and Nalin Patel hosted a webinar to cover the many valuations trends in the current environment: watch the replay

April 14: What's all the latest with SPACs craze? Our VC and mobility tech analysts are ready to discuss. Register here.
Season 3 of PitchBook's podcast, In Visible Capital, is coming soon and will feature our analysts' insights. Visit our podcast page for details on how to subscribe.

Deal Commentary

VC analyst Joshua Chao, whose coverage areas include biotech and life sciences, weighs in on the announced IPO plans of SoftBank-backed Zymergen:

"Biotech IPOs continue to be robust in 2021, a trend that has carried over from last year. In 2020, 73 biotech listings raised a record $11.5 billion and things don't seem to be slowing. As of March 26, we've already seen 27 privately backed biotech companies go public or file IPO registration in the US this year.

"Zymergen develops engineered microbes by leveraging automation and machine learning in what it calls 'biofacturing.' It raised a $350 million Series D in October—one of the largest biotech VC deals of 2020—bringing its total capital raised to just over $1 billion.

"Given the involvement from prominent crossover investors like Baillie Gifford, Perceptive Advisors, and SoftBank, the prior round set the company up nicely for the IPO announcement this week.

"While it didn't disclose plans for the IPO proceeds, we believe Zymergen is taking the next step of bringing its fermentation technology into the drugs/therapeutics space. Plus, we're likely to see IPOs this year from other red-hot synthetic biology companies like Ginkgo Bioworks and Lyell—both of which have raised crossover rounds at unicorn valuations.

"Zymergen's IPO announcement also shows that the synbio market is heating up, as evidenced by healthcare and life sciences investor Foresite Capital recently raising $969 million."

Joshua Chao, Ph.D.

Analyst
Venture Capital

In the News

A sample of our insights recently featured in the press:

Credit and debit card swipes are all handled by a small amount of payment processing companies. Analyst Robert Le helps explain the risk of a major outage, who would be most affected, and what the fallout would be. [Business Insider]

UK-based electric vehicle startup Arrival recently completed a merger with a US-based SPAC. Is a new trend emerging? Analyst Nalin Patel offered his thoughts. [Forbes, Yahoo Finance UK]

An immigration attorney uses our research to help address the issue of whether it still makes sense for international startups to open an office in Silicon Valley in a post-pandemic world. [TechCrunch Extra Crunch]

If you're a media member interested in interviewing our analysts, contact our PR team.

ICYMI

Here are highlights from our other research content published this quarter:

Market updates

Thematic research

Emerging Technology Research deep dives

Coming next week (subject to change)

Comparing Buyout Multiples in Europe and the US
Value-Based Care Drives Technology Opportunities
Biotech Went to Work as the World Stayed Home
Vertical Snapshot: Real Estate Tech

Thanks for reading! Feel free to email us any time with feedback, questions or tips!

Learn more about the PitchBook Institutional Research Group or access our research libraries for clients and non-clients.

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PitchBook News - It's here: Our Private Equity Barometer

Older messages

Fanatics scores $12.8B valuation

Deliveroo eyes $12.2B IPO valuation

Venturing into debt

PE and Toys R Us get another chance

Measuring private funds' liquidity risk

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