Private Placement Industry Insights as of January 31, 2022

Wednesday, February 16th, 2022 and is filed under Industry Reporting

We recently released our January Private Placement Insights report. See the highlights from the report below, or if you are a Premium Reporting subscriber, log in now to see the entire report. If you don’t have access, you can request a free trial.

  • After a record 2021, new fund activity slowed modestly in January. However, while fewer funds were added, the 19 funds added were targeting a larger amount of capital. New fund coverage is down 5% while the aggregate target is up nearly 80%. Activity was up for the tax-focused real estate strategies including 1031 Exchanges and Opportunity Zones, while Private Equity/Debt activity slowed. All others were on par with 2021 on a year-over-year basis.
  • As of February 1st, AI Insight covers 194 private placements currently raising capital, with an aggregate target raise of $21 billion and an aggregate reported raise of $9.8 billion or 47% of target.
  • Real estate-related funds, including 1031s, Opportunity Zones, and non-1031 real estate LLCs/LPs and private REITs represent the largest component of our private placement coverage at 73% of funds and 61% of target raise. Private equity/debt funds represent 13% of funds and 25% of target raise, although this does include five private market feeder funds that do not specify an offering target.
  • In terms of our coverage by general objective, income is the largest component at 57% of funds, while growth and growth & income follow at 27% and 17%, respectively.
  • The average size of the funds currently raising capital is $108.0 million, ranging from $5.0 million for a specified real estate fund to $2.0 billion for a private BDC.
  • 82% of private placements we cover use the 506(b) exemption, 12% use 506(c) and 6% have not yet filed their Form D with the SEC.
  • 36 private placements closed to new investors in January. Funds that closed this year have been on the market for an average of 186 days and the 35 funds that reported raised 103% of target on average.

Preqin recently released its updated forecasts for growth in private markets. The firm expects private market AUM to expand from its current level of $13.2 trillion to more than $23 trillion by 2026, with 15% annualized growth. Private equity and private debt are expected to increase the most through this period. Real estate, infrastructure, and hedge fund assets are forecast to increase modestly.

Part of the continued expansion into private markets is their continued outperformance. According to Preqin, private market strategies have outperformed global stocks for the last 13 years over all rolling time periods, with lower volatility.

Preqin also recently released a study on interest rates and private market performance. The firm reported that two segments, real estate and infrastructure, exhibited the highest positive performance correlation to rising rates, with performance in real estate actually higher than in times of flat rates. While returns were still positive for other categories in rising rate scenarios, venture capital and private debt exhibited the widest gap in returns in flat and rising rate markets (meaning returns were eroded the most by rising rates), and venture capital posted the strongest negative correlation to rising rates.

For illustrative purposes only.

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Chart and data as of January 31, 2022, based on programs activated on the AI Insight platform as of this date.

Activated means the program and education module are live on the AI Insight platform. Subscribers can view and download data for the program and access the respective education module.

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