Private equity industry trends
industry AuM as of 2018¹.
Capital distributed by fund managers to investors in 2018².
Top Performing Institutional Investors are Allocating 40% to Private Investments
According to the latest conducted by Cambridge Associates³, top decile performing institutional investors have increased their private investments* allocations to a mean of 40%.
Private Investment Allocation
*Private investments include non-venture private equity, venture capital, distressed securities (private equity structure), private real estate, private oil & gas/natural resources, timber, and other private investments.
The higher the allocation to private investments,
the better the returns.
The average annualized return for a greater than 15% allocation was 8.1%, 160 basis points higher than the group with a less than 5% allocation.
20 year Average Return (%)
Private equity allocations under 5%
Private equity allocations between 5% and 15%
Private equity allocations over 15%
20 year Average Private Investment Allocations (%)
Source: Endowment and foundation data as reported to Cambridge Associates LLC.
Notes: Analysis includes 132 endowments and foundations that provided returns and beginning year asset allocation for each June 30 from 1998 to 2018. Subgroups are based on each institution’s 20-year average allocation to private investments. Solid lines are drawn where the median private investments allocation for the entire universe intersects with the median return for the entire universe.
The Private Company Universe
The Private Company universe is significantly larger than the shrinking public company universe, creating a host of opportunities.
of businesses with ≥ $10M in sales are private companies in the USA
Decline in the number of US publicly traded companies since the 1996 peak
The majority of a company's growth occurs in a private format.
Growing trend: private companies are skipping public markets entirely or going public much later as matured businesses.
The average age of a company at IPO has nearly doubled since 1980: 6 yrs old in 1980 and 11 years old in 2017 at IPO.
Initial Public Offerings: Median Age of IPOs Through 2017, June 13, 2018
Median age for tech companies going public in 1999 was 4 years, respectively, compared with 12 years in 2018.
Median annual sales, meanwhile, were about $12 million then, compared with $173.6 million last year at IPO .
Demystifying common misconceptions
Single deal flow or a single manager approach is a recipe for disaster. Proper diversification greatly reduces the risk of permanent capital.
Probability of Portfolio with TVPI<1.0x Based on Portfolio Size
"TOO ILLIQUID; I'M TOO OLD"
Laddered consistently and periodically over 5 years (vintage diversification), a systematically designed PE portfolio should produce a staggered series of consistent cash flows and liquidity events for an investor. Cashflows can be heightened with the inclusion of private credit and real assets.
Laddered Diversified PE Portfolio Cash Flows for $2.5M total commitments.
"TOO LATE IN THE CYCLE"
Professional investors do not attempt to time private markets. They take a systematic, process oriented approach and create a roadmap to advance steadily towards a ‘stabilized portfolio of private equity’ via systematic vintage diversification.
U.S. public vs. private equity returns
By vintage year
The Crystal Capital Private Equity offering provides you an edge in the marketplace.