Clean energy, digital infrastructure opportunities emerge

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The Research Pitch

June 26, 2021

We're calling on allocators, asset managers and anyone active in the global private funds ecosystem to take our 2021 Sustainable Investment Survey.

The survey takes about 10 minutes and the question set is focused on investors' views surrounding sustainable investing, as well as the subtopics of ESG risk factors and impact investing.

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Various storylines at play in the up-and-down world of real assets

Real assets funds have posted lackluster numbers of late, with fundraising over the past four quarters hitting its lowest levels since late 2012. But these top-line numbers obscure several dynamic trends.

Infrastructure has seen consistent fundraising for the past few years, with low activity over the last four quarters attributable to the sector's concentration in a few massive funds.

The strategy is often touted for its steady returns of 5% to 15%, and 2020's market collapse bore this thesis out. Annualized IRRs for infrastructure funds never dipped below zero.

This is because many infrastructure assets provide essential services on long-term contracts; others, like container shipping ports, recovered quickly as consumer spending rebounded.

Going forward, the sector will further benefit from inflationary pressure. Recent progress toward a bipartisan infrastructure bill, which looks set to include at least some spending via public-private partnerships, is another positive signal.

In addition to traditional, transportation-related infrastructure, the asset class has seen two high-growth areas emerge: clean energy and digital infrastructure. Expect more and bigger fundraises focused on these two themes in the coming quarters.

Not all is smooth sailing in the real assets space, however. Oil & gas fundraising and deal activity have fallen off dramatically since the start of 2020. The sector has been hamstrung by low energy prices and the push toward renewables for years, with COVID-19 further depressing deal activity.

The ancillary strategies in the real assets space—including agriculture, metals & mining, and timber—have also seen relatively weak fundraising figures, though for different reasons.

For instance, although timber has seen prices soar in recent months, most timber investment is not carried out through private funds.

And although prices for the "technology metals" are also elevated, mining companies are working under a legacy of capex underinvestment and struggle to ramp up production in response to improved prices:

Read more analysis in our Q1 2021 Real Assets Report

We would love to hear your comments and feedback on how you use this report in your role—and how we can improve it.

Please reach out to me or our institutional research group.

Best,

Rebecca Springer, PhD
Analyst, Private Equity

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Thematic Research

Tech Giants Pursue Inorganic Growth with AI

How has M&A looked over the past 18 months with regard to AI and machine learning startups?

Somewhat muted.

There hasn't been much growth since the start of the pandemic, nor has there been much activity from giants like Facebook, Apple and Google.

To explain what's going on, our latest research note looks into the M&A priorities of big tech companies active in AI research & development, taking a deep dive into their deals since 2017 to see where they've been focusing and where future opportunities may lie:

Tech giants have been active in deep learning R&D, digital media optimization and conversational AI via tuck-in acquisitions.

Microsoft buying Nuance $16 billion and Workday buying Peakon for $700 million shows there's appetite to pay up for AI software that adds new business lines. (And without antitrust scrutiny?)

Since 2017, AI buyers have prioritized AI core software, AI automation platforms, natural technology platforms, and consumer AI over computer vision and most vertical applications.

read the free research

Webinars & Events

What is fund return smoothing?

Why can it lead to deceptive returns data?

How can you apply "desmoothing" techniques to better measure private fund volatility?

In this week's webinar, analysts Hilary Wiek and Andrew Akers discussed these topics at length to help make sure you have the most accurate information about your portfolio: watch the replay.

Deal Commentary

Information security analyst Brendan Burke weighs in on Transmit Security's massive $543 million Series A round at a $2.2 billion pre-money valuation:

"This deal size is the highest we have tracked in information security, surpassing Lacework's $525 million Series D from Q1 2021.

"Transmit Security achieved scale before raising VC funding, similar to the trajectory of data privacy startup OneTrust.

"The company addresses the passwordless authentication opportunity with biometric identity management.

"Adoption of passwordless authentication is growing rapidly as evidenced by 50% growth in Microsoft’s passwordless tools in 2020.

"We expect the technology to disrupt the $22 billion identity & access management market over the next 10 years.

"The scale of Duo Security's $2.4 billion exit to Cisco and the outperformance of Okta in single sign-on administration demonstrate the value of identity management to organizations, and we believe that passwordless can produce similar outcomes."

Brendan Burke

Senior Emerging Tech Analyst
Information Security

In the News

Our insights and data featured in the press:

How much VC money is going to crypto startups? Well, this year has already set a new annual record. [Bloomberg]

European startups have entered the era of the megadeal. [WSJ]

Several fintech startups have launched as banking alternatives with a focus on supporting underserved communities. Analyst Robert Le is among those quoted in this look into efforts to narrow the racial wealth gap. [Forbes]

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

ICYMI

Highlights from our other research content published this quarter:

Market updates

Thematic research

Emerging Technology Research (report previews)

Coming next week (subject to change)

2021 PitchBook Benchmarks (earlier than ever!)
Exploring Global PE Multiples by Sector
Robotaxis and the Road to Profitability
Gut Health Research Opens Market Opportunities
The Emerging Baltic VC Ecosystem

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

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Clean energy, digital infrastructure opportunities emerge

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