Record fundraisings, consolidation and Brexit are just some of the headlines that have caught our attention this week. Please note, some of these sites may require a subscription to view the article.
Sweden’s EQT raises €9bn for its biggest infrastructure fund
Sweden’s EQT amassed €9bn from institutional investors, including pension funds and sovereign wealth funds, in six months, exceeding an initial target of €7.5bn. The new EQT fund will focus on energy, transport & logistics and telecoms, alongside environmental and social infrastructure. EQT’s infrastructure funds have delivered an IRR of 34%, according to a person familiar with its performance.
Take a look at Preqin’s recently released 2019 Global Infrastructure Report for more fundraising data and analysis.
European private equity firms explore $30bn megafunds
Europe-based private equity firms are looking to raise more megafunds – in the $20-30bn range – in anticipation of opportunities to take large companies private, said consulting firm Bain & Co. So far, the largest private equity fund in Europe is the €16bn vehicles CVC Capital Partners closed in 2017. These funds are likely to be larger than the $24bn fund raised by US-based Apollo Global Management in 2017, the largest ever buyout fund.
Source: Financial News
More regional fundraising analysis can be found in the 2019 Preqin Global Private Equity & Venture Capital Report.
Hedge fund sees China distressed debt yielding juicy returns
Bets on beaten-down Chinese distressed bonds could pay off if the nation persists with its credit easing and there is a sustained rally in the domestic stock market, according to an Asia-based hedge fund that manages $3.5bn. Distressed dollar bonds from Chinese issuers have had their best start to a year since 2012. A strategy that includes investing in these notes “could generate out-sized returns” if an improving economy and share gains help investors recover more money from troubled debt, said Kevin Wu, a portfolio manager at Pinpoint Asset Management.
EC proposes lowering capital requirements for insurance companies with private equity, private debt
The European Commission has reduced the amount of capital insurance companies have to set aside as a risk-weight against their investments in private equity and private debt.
Source: Pensions and Investments
Number of workers in fund management industry predicted to drop for first time in a decade
A brutal shake-out is under way, and cutting costs is a dominant theme for 2019. The number of workers in the global fund management industry is predicted to fall for the first time in a decade as investment companies face rising costs and lower fee revenues. The sector’s total assets are expected to shrink for the first year since 2010, according to Casey Quirk, the Deloitte consultancy, as risk-averse savers move into cash following a tough year in the markets.
For the latest employment figures, please take a look at The 2019 Preqin Compensation and Employment Review.
New mobility worth billions? Venture capital thinks so
Billions of dollars of venture capital have poured into the ride-hailing sector, but with public investment rounds coming up, ride-hailing gorillas must have a potent ace up their sleeves, or be unreasonably arrogant about their chances of success. Is there a sweet spot, where the scooters are economical enough to permit the capital cost of the asset to be recovered in a short period, and resilient enough for an operator to make “gravy" profit that is not burdened by the initial investment?
China’s formerly white-hot tech sector is in the doldrums
A chill is sweeping through the country’s technology industry as the lavish financing that promising start-ups have come to expect has dried up. Job cuts have multiplied. Even China’s tech giants have not been spared, and have slashed bonuses and travel expenses. This is quite a remarkable reversal, given that more money was raised for venture capital funds in China in the first half of 2018 than in America, the first time that had ever happened: $56bn compared with $42bn, according to Preqin.
Source: The Economist
One in three asset management firms could disappear, says Invesco chief
Invesco’s Chief Executive says a third of the asset management industry could disappear over the next five years, as mounting fee pressures and rising costs spur more closures and consolidation. The number of M&A deals in the asset management industry jumped to a record 253 last year, according to Sandler O’Neill. This is likely just the beginning of a long, profound bout of consolidation that will reshape the asset management industry in the coming years, said Martin Flanagan.
For more on consolidation in the industry, take a look at our Alternatives in 2019 report.
Private equity goes to the vet: It shouldn’t happen to a vet
Vet businesses provide an opportunity for cash-rich private-equity firms to roll up a plethora of small, relatively inexpensive operations into bigger firms, sell them on or do initial public offerings, hopefully for a tidy return. According to Bain, a consultancy, this “buy-and-build” strategy, using businesses ranging from vets to hair salons to suppliers for tattoo parlours, is the hottest trend in private equity, accounting for one in five transactions globally last year.
Source: The Economist
London’s real estate market stutters as Brexit kills deal making
London’s commercial property market has become the latest casualty of Brexit. Real estate funds have not been spared, also taking a big hit. Investors have pulled £1.1bn out of these funds since October, according to Calastone. Redemptions are now taking place at a faster pace than in the aftermath of the June 2016 Brexit referendum. Yet while UK transactions decline, investors have continued to pour money into other European capitals, pushing prices to record levels. Yields on the best office buildings in Berlin are now about 3%, making them substantially more expensive than those in London. If lawmakers deliver a Brexit deal, that gap could start to look very attractive to global investors.