A NEW DECADE FOR PRIVATE MARKETS - MCKINSEY GLOBAL PRIVATE MARKETS REVIEW 2020 - FEBRUARY 2020
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A new decade for
private markets
McKinsey Global Private Markets Review 2020
February 2020
Contents Executive summary 2 1 Onward and upward 5 Fundraising stays strong 6 Regional fundraising 7 Fundraising by asset class 9 AUM: Another year, another all-time high 16 2 Running hotter 19 PE deal activity plateaued in 2019 20 Multiples and leverage continue to rise 22 Dry powder: No signs of slowing down 23 Industry structure: Rapid turnover, but little consolidation 24 3 Looking ahead to the new decade 27 ESG comes to private markets 28 Diversity and inclusion: Much more to do 31 A widening aperture for digital and analytics 32 Other GP/LP developments 35 4 Resiliency in a downturn 38 Authors and acknowledgments 41 Further insights 42
Executive summary
Welcome to the 2020 edition of McKinsey’s targets collectively approaching $350 billion, more
annual review of private investing. Our ongoing than at year-end 2018. Further, limited partners
research on the industry’s dynamics and (LPs) continue to raise their target allocations to
performance has revealed several critical insights, private markets. Even at current levels, LPs appear
including the following trends. to be under-allocated versus target levels by
more than $500 billion in PE alone—as much as
Private markets complete an impressive decade the global amount raised for PE in 2019.
of growth. Private market assets under manage
ment (AUM) grew by 10 percent in 2019, and $4 trillion Industry performance has been strong, but manager
in the past decade, an increase of 170 percent, selection remains paramount. PE outperformed
while the number of active private equity (PE) firms its public market equivalents (PME) by most mea
has more than doubled and the number of sures over the past decade. Variability in performance
US sponsor-backed companies has increased remains substantial, however, so the challenge—
by 60 percent. Over that same period, global public and the potential—of manager selection remains
market AUM has grown by roughly 100 percent, paramount for institutional investors. Although
while the number of US publicly traded companies persistency of outperformance by PE firms has
has stayed roughly flat (but is down nearly declined over time, making it harder to predict win-
40 percent since 2000). ners consistently, new academic research
suggests that greater persistency may be found
The fundraising outlook remains favorable. The at the level of individual deal partners. In buyouts,
early prognosis for 2020 is for continued strength: the deal decision maker is about four times as pre
by the end of 2019, large firms had announced dictive as the PE firm in explaining differences in
2 A new decade for private markets McKinsey Global Private Markets Review 2020
performance. This finding is intuitive to many in the in investing have soared, prompting greater
industry but remains tough for many LPs to act on. transparency on ESG policies and performance as
well as a rise in dedicated “impact funds.” Nine of the
The more things change.... The shape of the ten largest GPs now publish annual sustainability
industry has evolved as it has grown: buyout’s share reports. Perhaps more significant, our survey data
of PE AUM dropped by a third in the past decade, show a clear uptick in the value that managers
while venture capital (VC) and growth have taken off, attribute to ESG—in other words, they increasingly
led by Asian funds. Today, Asia accounts for more find that these factors are positive (or neutral
than twice as much growth capital as North America at worst) in achieving strong performance. Still, the
does, and about the same amount of VC. private markets are only in the early stages of
materially incorporating ESG factors into investment
... the more they stay the same. Megafunds of and portfolio management processes.
$5 billion or more increasingly dominate buyout fund
raising, making up more than half of the total in Diversity remains a challenge. Private market
2019. The share of funds below $1 billion has fallen firms have made only limited progress in improving
to a 15-year low. Yet paradoxically there is little diversity and inclusion. Women represent just
evidence of any consolidation at the top of the 20 percent of employees across the private markets
industry. And even as the number of active PE firms and less than 10 percent in investment team
continues to grow (it’s now nearly 7,000), more leadership positions. The industry’s performance on
managers are calling it quits than ever. Most of those other forms of diversity is also poor—recent
raised just one fund, suggesting that attrition is McKinsey survey data places combined black and
mainly a result of one-and-done managers. Hispanic/Latino PE representation at just
13 percent for entry-level positions and less than
Technology in every sector. Deal volume declined 5 percent for senior roles. Private markets firms
in every region except North America, where the may be missing an opportunity: increasing
amount of capital invested rose 7 percent to evidence shows that greater representation may
$837 billion, a new high. Tech deals, up almost meaningfully enhance performance.
40 percent, powered this growth. In parallel,
the number of tech-focused private market firms Many firms are thinking about how to digitize
has grown rapidly, while many others have tilted in the investment process—and a handful are moving
that direction. Increasingly, we see general ahead. The largest GPs have taken the lead,
partners (GPs) that once had a technology “vertical” especially in sectors such as real estate where inve
team now starting to view technology as a horizontal stors can draw upon larger, more accurate
theme cutting across many of their deals. data sets. In these areas, machine-learning algo
rithms using a combination of traditional and
Signs of a peak? US buyout multiples climbed yet nontraditional data have demonstrated the ability
again in 2019, continuing a decade-long trend, to estimate target variables (such as rents) with
to reach nearly 12x. Leverage surpassed levels last accuracies that can exceed 90 percent.
seen in 2007. Dry powder rose further due to
record fundraising and stagnant deal volume. It now Many firms have predicted a downturn, but fairly
stands at a record $2.3 trillion. PE accounts for few have adapted their operating model to
most of this total, though PE dry powder is still less prepare. New McKinsey research shows that while
than two “turns” of annual deal volume, within most fund managers consider cyclical risk as part of
the range of historical norms. their due diligence and portfolio management
processes, only a third have adjusted their portfolio
The industry finds new opportunities in ESG. Public strategy to prepare for a potential recession.
interest and LP pressure to take environmental, GPs can take several steps to build resiliency and
social, and governance (ESG) factors into account improve performance through a downturn.
Executive summary 3
One example: GPs with dedicated value creation insights from our colleagues around the world who
teams outperformed those without them by work closely with the world’s leading GPs and LPs.
an average of five percentage points during the
latest recession. This report is divided into four chapters. In the first,
we review capital inflows in 2019 and the rise in
AUM. In the second, we discuss the deployment of
About this report capital, the outlook for dry powder, and recent
McKinsey is the leading advisor to private markets changes in the industry’s structure. In the third, we
firms, including private equity, real estate, and consider the implications of three material
infrastructure firms, as well as to the institutional challenges to the industry’s growth and stature: the
investors that allocate capital to private markets, growing prominence of ESG issues, the industry’s
such as pensions, sovereign wealth funds, lack of diversity, and the promise and perils of digital
endowments, and family offices. and analytics. The final chapter discusses
resiliency in a downturn, and the steps firms can
This is the 2020 edition of our annual review of take during the remainder of the current cycle
private markets.1 To produce it, we have developed to lay the groundwork.
new analyses drawn from our long-running
research on private markets, based on the industry’s We welcome your questions and suggestions at
leading sources of data.2 We have also gathered Investing@McKinsey.com.
We define private markets as closed-end funds investing in private equity, real estate, private debt, infrastructure, or natural resources, as well
1
as related secondaries and funds of funds. We exclude hedge funds and, except where otherwise noted, publicly traded or open-end funds.
Data cited in this report were produced by McKinsey and by Burgiss, Cambridge Associates, Capital IQ, CEM Benchmarking, Greenhill, Hedge
2
Fund Research, PitchBook, Preqin, Refinitiv LPC, and the World Bank.
4 A new decade for private markets McKinsey Global Private Markets Review 2020
1 Onward and upward
Fundraising in 2019 nearly matched 2018’s record haul, but as always, the
devil is in the details. North American buyout had its best fundraising
year ever. Private market managers in Europe also experienced strong
growth, while Asia fundraising declined for the second straight year.
Megafunds still flourish, though the industry continues to defy predictions
by not consolidating toward the larger firms. Meanwhile, fundraising
for infrastructure and natural resources slowed, as did private debt, which
declined for the second consecutive year.
Total AUM across private markets hit another all-time high at $6.5 trillion,
as investors continue to shift capital from public asset classes in search
of upside. Performance across vintages since the global financial crisis has
been remarkably strong and consistent. Still, the broad range of perfor
mance among funds permits even more meaningful upside for those LPs
capable of picking winners (and threatens some measure of downside
for those less fortunate).
5Fundraising stays strong Drawing definitive conclusions based on year-over-
In 2019, the industry raised $919 billion, roughly in year comparisons is challenging, given imperfect,
line with 2018’s record clip (Exhibit 1). At the time late-breaking data and the uneven pattern of large
of publication, year-over-year fundraising was down raises. With that in mind, the longer-term trajec-
approximately 3 percent, with some firms yet to tory demonstrates steady growth. Cumulative trailing
report 12-month totals. Despite the small dip, 2019 five-year fundraising, a reasonable proxy for fee-
was the second-strongest fundraising year ever, bearing assets, suggests that the industry’s assets
trailing only 2018. And the early prognosis for 2020 are at an all-time high. By that measure, fund-
McKinsey 2020 is more of the same: by the end of 2019, large raising in private markets has grown at 14 percent
Global Private Equityfirms had announced
Markets Review targets collectively approach annually since 2014. Private debt, private
Exhibit 1 of 38 ing $350 billion, exceeding the $300 billion target equity (PE), and infrastructure have grown faster
at this point last year.3 than private markets as a whole, though there
Exhibit 1
Fundraising, 2019
Private markets in-year fundraising,1 2019
Closed-end Natural resources Private
Private equity real estate 2 Private debt and infrastructure markets
North Total, $ billion 350 103 46 58 556
America
2018–19, $ billion 9.4 19.9 –27.0 –8.7 –6.4
YoY change, % 2.8% 24.1% (36.8%) (13.1%) (1.1%)
Europe Total, $ billion 99 32 47 40 218
2018–19, $ billion 0.6 0.1 9.3 6.2 16.1
YoY change, % 0.6% 0.2% 24.5% 18.5% 8.0%
Asia Total, $ billion 94 13 8 2 117
2018–19, $ billion –27.3 –8.4 1.6 –4.9 –39.1
YoY change, % (22.5%) (39.3%) 23.2% (71.7%) (25.0%)
Rest of Total, $ billion 12 3 4 8 27
world
2018–19, $ billion –5.9% –0.7 2.5 2.4 –1.7
YoY change, % (32.5%) (17.8%) 194.6% 44.4% (5.7%)
Global Total, $ billion 555 151 106 108 919
2018–19, $ billion –23.2 10.8 –13.6 –4.9 –31.0
YoY change, % (4.0%) 7.7% (11.4%) (4.4%) (3.3%)
1
Excludes secondaries and funds of funds.
2
Closed-end funds that invest in property. Includes core, core-plus, distressed, opportunistic, and value-added real estate, as well as real estate debt funds.
Data source: Preqin
3
Includes funds with a target of more than $1 billion that have had at least one close but not a final close by end of 2019. Excludes one large fund
with a target that has been publicly revised downwards, and three state-backed funds.
6 A new decade for private markets McKinsey Global Private Markets Review 2020Global Private Equity Markets Review
Exhibit 2 of 38
Exhibit 2
North American PE fundraising reached an all-time high in 2019.
$ billions1 2014–19 2018–19
CAGR, % growth, %
350
Total 14.8 2.8
300 Buyout 16.1 84.5
Venture 9.7 15.7
250 Growth 11.3 –10.0
Other 20.1 –78.8
200
150
100
50
0
2005 2007 2009 2011 2013 2015 2017 2019
North American buyout funds greater than $10 billion by year of close
2015 2016 2017 2018 2019
Number of funds 1 1 4 2 6
Collective fundraising, $ billion 18.0 10.5 63.0 34.5 95.3
1
Excludes secondaries and funds-of-funds.
Data source: Preqin
are signs that growth in private debt may be slowing the back of record PE fundraising, while in Europe,
(see page 12). While real estate has grown at managers raised a record $218 billion, driven
9 percent, the data reflects only a partial picture of by growth across all private market asset classes.
the asset class, as it is limited to closed-end
funds;4 real estate assets have grown faster in In North America, PE fundraising reached
open-ended vehicles. $350 billion for the first time, driven by a bounce-
back in the buyout segment, which increased
Regional fundraising by 85 percent to a record $240 billion after a down
North America and Europe: Fundraising in 2019 2018 (Exhibit 2). The reported slowdown in
remained healthy on both sides of the Atlantic. 2018 may simply reflect “lumpiness” in the timing
In North America, managers raised $556 billion on of large raises, an inherent issue in assessing
4
For a comprehensive look at closed and open-end vehicles, see “A turning point for real estate investment management,”
November 2019, McKinsey.com.
Onward and upward 7the asset class annually. While four funds larger than of three large Asia-focused flagships. In 2019, foreign
$10 billion closed in 2017 and six in 2019, 2018 saw fundraising reverted to levels in line with historical
only two such funds close. averages, whereas Asia-based managers declined
a second year in a row. Of course, this follows
Closed-end real estate fundraising in the region had the two best fundraising years ever for Asia-based
another strong year, propelled by the raise of three managers, in 2016 and 2017, so this may simply
megafunds ($5 billion or more), including the largest reflect fundraising cyclicality, but it is a trend to
and third-largest opportunistic funds ever. Other watch in 2020.
real assets fared less well in 2019, as fundraising for
natural resources and infrastructure fell by How to explain the slowdown in Asia fundraising?
13 percent in North America. Concerns about this The simplest rationale starts with the mountain
decline may be premature, however, as approx of dry powder focused on the region, which reached
imately $55 billion in additional fundraising5 was a new high of $419 billion in 2019. Considered
pending at year-end in North America for the alongside the region’s slowing deal volumes (down
asset class, including an infrastructure fund that 35 percent in 2019), managers may have eased
closed in early 2020 and became the second fundraising in order to work through already
largest infrastructure fund ever raised. committed capital. Further, in recent years, Asia’s
exit environment appears to have become more
European private market fundraising increased by challenging; 2019 marked the third year in a row that
8 percent overall. The growth was fueled by exit volume and count decreased, partly driven
increases in private debt as well as natural resources by higher requirements for local companies to be
and infrastructure. Infrastructure’s growth has effectively sold or listed on the stock exchange.
been particularly impressive, as fundraising has Concerns over illiquidity may have tempered inves
more than tripled in the past five years. Driven tors’ enthusiasm. Softening LP appetite for
partly by the expectation of continued privatization private markets exposure may also have been driven
of government-owned infrastructure assets, as partly by region-specific concerns. In China, trade
well as the divestment of non-core assets by opera tensions with the US have been a drag on economic
tors, infrastructure fundraising has increased at growth. In addition, tighter asset management
27 percent annually over the last five years. PE and regulations, first rolled out in 2018, have continued
closed-end real estate fundraising in the region held to slow Chinese fundraising. In an effort to curb
steady at $99 billion and $32 billion respectively. debt and reduce systemic risks, the Chinese govern
ment has placed restrictions on banks’ and insurers’
Asia: Fundraising in Asia slowed again in 2019, falling ability to invest in alternative asset classes, including
by almost $40 billion or 25 percent year on year. PE. As a result, renminbi-based fundraising has
All asset classes (with the exception of private debt) plummeted, and though there are signs suggesting
declined, notably PE, which fell by $27 billion. that PE limitations may soon be lifted, uncertainty
Within PE, venture and growth had a particularly surrounding the regulatory environment may have
poor year, both falling by nearly 50 percent.6 helped suppress 2019 fundraising.
This year’s decline is the second straight for Asia The decline in venture and growth fundraising over
fundraising, which dropped 25 percent from 2017 to the past two years in Asia reflects a shift in
2018. That year saw a steep drop in fundraising by fundraising from growth toward buyouts. From 2017
Asia-based managers, while foreign managers—that to 2019, venture and growth’s share of PE fund
is, those based elsewhere, raising capital to invest raising has decreased from 75 percent to 60 percent,
in Asia—had a record year driven by the closing while buyout’s share has increased from 21 percent
Among funds with a target of more than $1 billion and at least one close but no final close by end of 2019.
5
E xcludes large state-backed growth and venture funds raised between 2014 and 2019 for a total of $110 billion.
6
8 A new decade for private markets McKinsey Global Private Markets Review 2020to 37 percent. In part, this is a manifestation of (Exhibit 3). Funds greater than $10 billion accounted
maturing regional economies; GPs are beginning to for 35 percent of buyout fundraising in 2019, up from
see more opportunities to pursue buyout investment 23 percent in 2018 and nearly equal to 2008’s all-
theses as well as growth deals. time peak. At the same time, the share of small funds
(less than $1 billion) fell to a fifteen-year low.
Asia’s lone bright spot in 2019 fundraising was private
debt, which rose 23 percent on the year. Though The sustained fundraising growth for PE reflects
less than 10 percent of the regional total, private debt widespread LP conviction in the asset class’s ongoing
has garnered more attention from investors in potential for outperformance.
recent years, as the search for new sources of yield
in a low-rate environment continues and tradi- PE funds have outperformed public markets, even
tional lenders struggle to keep up with rising demand during one of the longest-ever bull markets.
for credit, particularly from mid-market borrowers. PE vintages from 2009–2016 outperformed public
market equivalent (PME) benchmarks, according
McKinsey 2020 Fundraising by asset class to data from both Burgiss and Cambridge
Global Private EquityPrivate equity:
Markets Megafunds ($5 billion or more) con
Review Associates (Exhibit 4). A passive investor in PE
Exhibit 3 of 38 tinued to drive buyout fundraising growth, making would have performed quite well over the
up more than half of total fundraising in 2019 past decade.
Exhibit 3
The largest buyout funds account for a growing share of PE capital.
Global buyout fundraising,1 %
100 $10 billion
10
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
1
Excludes secondaries and funds-of-funds. By fund size and year of close.
Data source: Preqin
Onward and upward 9Global Private Equity Markets Review
Exhibit 4 of 38
Exhibit 4
PE has topped public market returns since 2009.
PME and mPME (S&P 500) by vintage, PME/mPME=1
1.20 1.19
1.15
1.13
1.12
1.10 1.10 1.08
1.08
1.09 Burgiss (PME comparison)
1.06
1.05 Cambridge (mPME comparison)
1.05 1.04
1.03
1.01 1.04
1.04
1.02
1.00 PME/mPME performance
0.99 1.00
0.97 0.96
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Data source: Burgiss Private IQ, Cambridge Associates
Of course, passive investment in PE isn’t yet feasible nounced, but fund size is, unlike in buyouts, positively
for most investors—there is no ETF equivalent correlated with performance—that is, the largest
for the asset class. Manager selection presents both funds tend to outperform (Exhibit 6). It has long been
risk and opportunity; the consistency of outper recognized that strong reputations and unique
formance by the asset class as measured in pooled networks provide top VCs preferential access to
returns belies substantial variation in performance the next generation of leading entrepreneurs,
among individual funds. In both VC and buyout, stars enabling persistent outperformance. The recent
have outshone laggards by a wide margin, but period indicates a slight twist: in VC bigger has
it remains hard to predict the winners (and perhaps generally (though not in every case) meant better for
even harder to gain access to the predictable several years now. But interestingly, this does
winners). In buyout vintages from 2000 to 2016, not appear to have affected VC fundraising strategies
median performance is comparable across very much. As we noted last year, venture capital
funds of various sizes. On the other hand, variance GPs (with a couple of noteworthy exceptions) have
in performance is inversely correlated with fund remained fairly disciplined with respect to
size: the spread between the top five percent and flagship fund size, whereas their PE cousins have
bottom five percent is particularly noticeable in rapidly expanded fund size.
small-cap funds (Exhibit 5) and smallest among the
larger funds. Simply put, smaller funds have higher Investors in private markets have limited options
highs and lower lows. for avoiding active-management risk. Manager
selection is simply part of the game, and it is clear
The picture is somewhat different in VC. For vintages from the data that considerable outperformance
from 2000 to 2016, not only is manager selection can result from being better than average at picking
risk between funds small and large equally pro managers. The wrinkle is that most LPs seem to
10 A new decade for private markets McKinsey Global Private Markets Review 2020Global Private Equity Markets Review
Exhibit 5 of 38
Exhibit 5
Buyout: Similar median returns across fund sizes, with larger spread in returns for
small cap funds.
Net IRR 2000–19 for global buyout vintages 2000–16, %
40
30
Top 5%
20
Top quartile
Median
10 Bottom quartile
0
Bottom 5%
–10
McKinsey
–20 2020
Small cap Mid cap Large cap Mega cap Super cap
Global Private
($5 billion)
Exhibit 6 of 28
Data source: Burgiss Private IQ
Exhibit 6
Venture capital: Larger funds outperformed smaller funds over the last decade.
Net IRR 2000–19 for global venture capital vintages 2000–16, %
50
40 Top 5%
30
Top quartile
20
Median
10
Bottom quartile
0 Bottom 5%
–10
–20
–30
$1 billion
Data source: Burgiss Private IQ
Onward and upward 11believe they’re better than average, even while According to a 2017 study, for instance, there is no
manager selection has only grown more challenging. significant relationship between change in fund
As we first noted in 2010, and as recent academic size and performance. In other words, despite anec
research has since confirmed, persistence of per dotal accounts to the contrary, a successful
formance by PE firms has declined considerably.7 manager that increases fund size in a subsequent
vehicle is no less likely to succeed at the new
Other research on the topic provides some additional level than before.9
nuance. This research finds performance persis-
tence for both buyout and VC, but for individual Despite the challenges posed by manager
decision-makers—such as a deal partner—rather selection and performance persistence, most
than for firms or funds.8 One study finds that in investors maintain conviction with the
buyout, the individual is about four times as important PE asset class and show no signs of easing back
as the PE firm in explaining differences in per on allocations.
formance. Individual investors’ repeatable investment
skills explain this persistence. For example, in VC, Private debt: For the second straight year, private
human capital and networks are the most important debt fundraising softened. After 2017’s record
predictors—personal networks can help with haul, fundraising decreased by 9 percent in 2018
sourcing attractive deals, building the right equity and, against the expectation of many in the industry,
syndicate, and bringing the most helpful capabilities by a further 11 percent in 2019 (Exhibit 7). None
McKinsey 2020 and expertise to portfolio companies. theless, fundraising for the asset class still surpassed
Global Private Equity Markets Review $100 billion for the fifth year in a row, finishing
Still other research highlights factors that do not off the decade at a level more than twice as high
Exhibit 7 of 38
appear to affect persistency of performance. as in 2010.
Exhibit 7
After sustained growth, private debt fundraising cooled off in the past two years.
Private debt fundraising,1 $ billion
131
116 119
103 106
68 72 69
42 40
23
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
1
Excludes secondaries and funds-of-funds.
Data source: Preqin
7
“Private equity Canada 2010: Preparing for the next wave of growth,” 2010, mckinsey.com; Reiner Braun, Tim Jenkinson, and Ingo Stoff, “How
persistent is private equity performance? Evidence from deal-level data,” December 2015, ssrn.com.
8
Amy Whyte, “Investors ‘May Be Right’ to Bet on Star Private Equity Managers,” Institutional Investor, October 31, 2019, institutionalinvestor.com.
9
Greg Brown, Raymond Chan, Wendy Hu, Kelly Meldrum, Tobias True, “The Persistence of PE Performance,” Journal of Performance
Measurement, Fall 2017, adamsstreetpartners.com.
12 A new decade for private markets McKinsey Global Private Markets Review 2020Private debt’s growth began in the wake of the $100 billion in 2019. While natural resources
financial crisis, when tighter capital requirements fundraising slowed globally in 2019, infrastructure
curtailed banks’ lending, even as demand for fundraising—some of it targeting natural
credit quickly recovered. Often offering higher yields resources—continued to climb. Infrastructure saw
than public debt, private credit became an attractive a handful of successful large raises in Europe
option for investors looking for yield in a low-rate and North America, and the 2019 uptick continues
environment, leading to a fundraising boom in North a multiyear growth trend for the asset class.
America and Europe.
In the past five years, infrastructure has grown
Several factors may have contributed to the slight by 17 percent annually, making it the fastest-growing
pullback since 2017. First, following several years private asset class. In a yield-starved world,
of record fundraising, private debt dry powder investors continue to seek infrastructure opportu
climbed to a record $297 billion in 2019. Managers nities, which many believe offer government
may be easing fundraising while they work through bond-like risk coupled with higher yields than
committed capital, which has increased by sovereign debt. For institutional investors
50 percent in just the last three years. Second, amid with perpetual or multigenerational time horizons,
concern about the potential end of the current infrastructure provides stable, long-term, inflation-
economic cycle, some investors are cautious about protected returns. Fundamentals appear to be
private debt’s performance in a recession. These strong: populations are growing stably, and infra
concerns are exacerbated by a rebound in “covenant- structure in developed markets is aging. The
lite” loans, which have again become commonplace world has more infrastructure needs than dollars
as deal competition has intensified. As we saw in the to finance them, a gap that is particularly acute
global financial crisis, lack of covenants can limit in emerging markets.
lenders' ability to manage risk and minimize loss in
times of market stress. Finally, red-hot markets Somewhat surprisingly, Asian fundraising for
make equity an attractive source of capital, even in a natural resources and infrastructure dropped by
record-low rate environment. 70 percent in 2019, continuing a recent slide.
In our view, this is partly attributable to the slowing
Natural resources and infrastructure. Global rate of infrastructure development in China over
fundraising for vehicles targeted at natural the last few years, which has limited the need for
resources and infrastructure held steady at just over private market capital.
In buyout, the individual is about
four times as important as
the firm in explaining differences
in performance.
Onward and upward 13Global Private Equity Markets Review
Exhibit 8 of 38
Exhibit 8
Within core, capital has shifted to open-end funds.
Core/core-plus gross AUM, by subsegment, %
100% = $1.034 trillion +11% p.a. $1.731 trillion $ CAGR, %
15 11 Closed end commingled +4
21 28 Open end commingled +18
65 61 Separate accounts +10
2013 2018
Data source: IREI for open-ended separate accounts; IPD Global Quarterly Property Index for open-ended core commingled funds; Preqin for all
closed-ended funds data (value-add, opportunistic, debt); eVestment for institutional securities; Simfund for retail securities
Real estate: Closed-end real estate fundraising grew prefer control over the timing of their cash flows, and
8 percent year over year. Closed-end strategy open-end funds allow LPs to add dollars and
fundraising is more typically measured on an annual take distributions at their discretion, an option that
basis than open-ended strategies, as the latter includes hold periods well beyond the duration
does not return capital at the same velocity (that is, of a traditional closed-end vehicle. For investors
the funds can stay invested in perpetuity). Within trying to maintain long-term exposure to a
closed-end funds specifically, opportunistic fund less-correlated asset class, open-end vehicles are
raising grew 38 percent year over year, reaching a more efficient way to do so. Finally, open-end
a new post-crisis high. That record included two very funds offer investors the opportunity to know what
large funds—representing the largest and third- they are buying, particularly for mature vehicles.
largest opportunistic funds ever raised—which As such, open-end vehicles offer a level of trans-
together accounted for more than half of total oppor parency that closed-ended funds, which typically
tunistic fundraising in 2019. feature blind-pool investing, cannot match.
While closed-end vehicles have steadily grown, Across both types of vehicles, the needs of LPs have
open-end funds have grown faster (Exhibit 8). been evolving in three noteworthy ways. First,
Three factors may help explain this shift in investor as a share of their real estate allocations, LPs have
preferences. First, the overlap between risk traded down the risk spectrum in the years since
preference and vehicle type has created a tailwind— the global financial crisis (Exhibit 9). Allocations to
at this point in the cycle, investors have rotated core, core-plus, and debt strategies have grown
into lower-risk strategies, which tend to be open- more quickly than value-add, opportunistic, and
ended (as we discuss below). Second, investors distressed strategies. One likely reason is a search
14 A new decade for private markets McKinsey Global Private Markets Review 2020Global Private Equity Markets Review
Exhibit 9 of 38
Exhibit 9
Fund flows are shifting to lower-risk strategies.
Real estate gross AUM contribution, by strategy, %
100% = $2.656 trillion +7% p.a. $3.779 trillion $ CAGR, %
17 17 Securities 7
4 5 Debt 14
25 19 Opportunistic 2
14 Value-added 6
15
45 Core/core-plus 11
40
2013 2018
Data source: IREI for open-ended separate accounts; IPD Global Quarterly Property Index for open-ended core commingled funds; Preqin for all
closed-ended funds data (value-add, opportunistic, debt); eVestment for institutional securities; Simfund for retail securities
for yield, as many investors have rotated away Third, LPs are looking for ways to get exposure
from sustained low yields in traditional fixed income. to real estate but will only pay for higher cost
This influx of capital has compressed cap rates structures if they deliver consistent alpha. This
and thus forward-looking returns at the safest end push for lower costs has led to rapid AUM
of the risk spectrum, prompting growth in core-plus growth for several very large investment
and likely supporting the recent surge in oppor managers—most notably, funds sponsored by
tunistic fundraising, which could presage a reversal insurance companies and traditional asset
of the recent trend (not yet factored into the managers, both of which often benefit from balance-
included chart). sheet capital and in-house distribution networks.
These embedded advantages provide scale
Second, more LPs are going direct. Many larger, economics to these players, allowing them to com
at-scale LPs have built in-house capabilities, pete with relatively low fee structures (typically
increasing control and discretion through separate without carried interest). As these investors grow
accounts, discretionary sidecars, coinvestments, larger, and as the institutional investment landscape
and direct investment through large-scale joint grows increasingly fee-averse, managers with
ventures (JVs). Others are tying up with operating higher cost structures will be further pressed to
companies, either by buying them outright or by justify their fees through differentiated value
investing through exclusive agreements. By increas propositions and proven ability to outperform
ing allocations to more-direct strategies, LPs through cycles.
both lower their costs and retain greater control
over decision making and cash-flow timing—both LPs' needs are changing—and so are the sources
attractive attributes. of capital, as retail dollars enter the market.
Onward and upward 15Whether through wirehouses or even direct distri but it was PE that drove most of the increase. PE
bution, retail investment in private real estate grew 12.2 percent to $3.9 trillion, about 60 percent
has grown substantially, providing a new source of of the total.
capital for managers traditionally focused on
institutional and institutional-like pools. Managers 2019 capped an impressive decade for private
building products for retail and the distribution markets, during which AUM grew by some $4 trillion
capabilities to access these investors will be advan (169 percent). Approximately 60 percent of
taged, as retail investors hold pent-up demand net new capital came from PE, which increased
for this asset class. by $2.3 trillion.
PE has changed as it has grown. Buyout funds
AUM: another year, another comprised nearly 75 percent of the total in 2010 but
all-time high represent just over half today, as VC and growth
McKinsey 2020 In 2019, private market AUM grew by 10 percent, AUM have taken off. Buyout has grown quickly, but a
Global Private Equityreaching
Markets$6.5 trillion, another all-time high
Review tremendous rise in Asian VC and growth funds has
(Exhibit 10). AUM increased for all asset classes, tilted the balance. While Asia represented only
Exhibit 10 of 38
Exhibit 10
AUM now totals $6.5 trillion, almost 2.7× more than in 2010.
Private market assets under management, H1 2019
100% = $ billion $2,067 $988 $691 $107 $813 $992 $813
Rest of world $63 (3%) $50 (5%) $41 (6%) $23 (3%) $44 (4%)
$57 (7%) $80 (10%)
Asia $238 (11%) $98 (10%)
$76 (9%)
$411 (42%) $242 (30%)
Europe $527 (25%) $272 (27%)
$204 (25%)
$417 (60%)
$104 (11%)
North America $1,240 (60%) $54 (8%) $492 (61%) $579 (58%) $452 (56%)
$423 (43%)
$179 (26%)
Buyout Venture capital Growth Other Private Real estate Infrastructure and
debt natural resources
Private equity Real assets
Data source: Preqin
16 A new decade for private markets McKinsey Global Private Markets Review 202012 percent of global VC AUM in 2010, it now consti The outlook for continued growth in private market
tutes over 40 percent, about the same size as AUM, from both traditional and new sources of
North America. In growth capital, Asia has already capital, remains strong. For all the attention they
overtaken North America, accounting for receive, LP allocations to private markets still
60 percent of the market compared to North tend to account for only 5 to 15 percent of portfolios.
America’s 26 percent. And according to Preqin, LPs are underweight
relative to their target allocations for PE (Exhibit 12).
Global PE net asset value has multiplied Closing that gap would require more than
8 times since 2000, almost three times as fast as $500 billion in additional capital commitments—
public market capitalization, which has grown as much as the global amount raised for PE
approximately 2.8 times over the same period in 2019. Further, the gap does not account for the
(Exhibit 11). Yet it is important to keep in mind that continued growth in LP target allocations, which
even after two decades of torrid growth, private increased by an average of 1 to 2 percentage points
McKinsey 2020 market AUM remains miniscule next to public mar for most LP types over the last decade. All the
Global Private Equitykets, coming
Markets in at less than 8 percent of total
Review evidence suggests that despite the record amount
public equity market capitalization and 3 percent of capital committed to PE over the last several
Exhibit 11 of 38
of public debt. years, there’s likely more to come.
Exhibit 11
The value of PE companies has grown more than eightfold since 2000, outpacing
public market equities.
Global private equity net asset value1 and public equities market capitalization, indexed to 2000
9.0
PE net
8.0 asset value
7.0
6.0
5.0
4.0
3.0 Public equities
market cap
2.0
1.0
0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2019
1
Net asset value is defined as AUM less dry powder.
Data source: The World Bank, Preqin
Onward and upward 17Global Private Equity Markets Review
Exhibit 12 of 38
Exhibit 12
All major LP types are under-allocated to PE.
Allocations to PE
20 Bubble size indicates
approximate relative AUM held
by LPs that allocate to PE
16
Sovereign wealth fund
12
Target allocation, %
Public pension funds
8
Private sector
pension funds
4
Insurance companies
0
0 1 2 3
Gap between target and actual allocation, percentage points
Data source: Preqin
In addition, new sources of capital are finding capital from the retail and high-net-worth markets.
their way into the private markets. Some of the Meanwhile, US regulators have started considering
largest private markets GPs are ramping up ways to roll back restrictions on individuals’
fundraising from nontraditional sources, including ability to invest in PE and VC funds, which may
individual investors. Through feeder vehicles provide another tailwind. Though this trend
into classic buyout funds, as well as newer products is still in the early innings, retail investors are
designed for sale via financial advisors, the largest beginning to represent a meaningful source of
players in the industry are finding ways to raise capital for private market managers.
18 A new decade for private markets McKinsey Global Private Markets Review 20202 Running hotter
PE deal volume was stable in 2019, and deal count fell substantially.
Managers were not shy when they came to the table, however: the
earnings multiples they paid rose to a new record of nearly 12x, partly
fueled by record leverage. With fundraising strong and deal volume
flat, dry powder rose, increasing to nearly 2x annual PE deal volumes. As
the industry has amassed capital, its structure has evolved in some
ways. The ranks of managers are seeing greater churn, as new firms are
formed and others fade away. In other ways, however, the structure
remains the same. We see little evidence of consolidation among the
largest firms.
19PE deal activity plateaued in 2019 2019’s largest investment was less than $5 billion.
Capital deployment was essentially flat in 2019. PE Ongoing geopolitical tensions may have also
deal volume plateaued at $1.47 trillion versus $1.49 caused a bit of a pullback in capital deployment in
trillion in 2018 (Exhibit 13). Before 2019, deal volume the region.
had grown 12 percent annually from 2013 to 2018.
Meanwhile, global deal count fell 13 percent to about
Deal volume declined in every region except North 9,300 deals, the first drop since 2009 (Exhibit 15).
America, where capital invested rose 7 percent (Note that the figure is preliminary and may be
to $837 billion, a new high (Exhibit 14). Investments adjusted upward later in 2020.) Taken together with
in technology companies were critical to the rise, record levels of dry powder and rising multiples,
up 37 percent in 2019 on the back of three very large softening deal count may suggest that GPs are hav
public-to-private tech buyouts, and consistent ing a harder time finding the same number of
with the multiyear growth in technology investments attractive investment opportunities as in previous
(see page 23). European deal activity pulled back, years. All regions saw declines, with Asia witnessing
with $505 billion invested in 2019, down 8 percent the largest drop (roughly 30 percent). North
from the previous year. Still, European deal volume America, the largest market with 55 percent of all
is up 4 percent annually since 2014. deals, experienced a decline of 11 percent.
In Asia, on the other hand, deal volume fell 35 With deal count softening but deal volume flat, the
McKinsey 2020 percent, from $87 billion in 2018 to $56 billion in average PE transaction in 2019 rose to $157 million,
2019. “Lumpiness”
Global Private Equity Markets Review in the technology sector up 14 percent from the prior year. This continues
accounted for most of the decline. In particular, two a multiyear growth trend in average PE deal size,
Exhibit 13 of 38
large 2018 tech deals totaled $30 billion, but which has risen 25 percent since 2014. Two shifts
Exhibit 13
PE deal volume was flat in 2019 after growing 12% annually from 2013–18.
PE deal volume, $ trillions
–1%
12% 1.49 1.47
1.33
1.23 1.19
1.13
0.85
0.72 0.72 0.74
0.59
0.30
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Data source: Pitchbook
20 A new decade for private markets McKinsey Global Private Markets Review 2020Global Private Equity Markets Review
Exhibit 14 of 38
Exhibit 14
PE deal volume rose only in North America while deal count fell in all regions.
Deal volume by region, $ billions Deal count by region, thousands of deals
900 6.0 North America
Europe
800 Asia
Rest of world
5.0
700
600 4.0
500
3.0
400
300 2.0
200
1.0
100
0 0
McKinsey
2000 2020
2004 2008 2012 2016 2019 2000 2004 2008 2012 2016 2019
Global Private Equity Markets Review
Data source: Pitchbook
Exhibit 15 of 38
Exhibit 15
PE deal count declined 13% in 2019 but grew 8% annually from 2013–18.
PE deals, thousands
–13%
8%
10.8
10.3
9.8 9.8
9.0 9.3
7.1 7.4 7.5
6.4 6.2
4.4
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Data source: Pitchbook
Running hotter 21Global Private Equity Markets Review
Exhibit 16 of 38
Exhibit 16
US buyout valuations reached new highs in 2019.
Valuation multiple,1 times US buyout Russell 2000
13.7x
13.4x
12.9x 13.0x
12.3x 12.6x
11.6x 11.9x
10.8x 10.8x 11.0x 10.9x 10.7x 10.8x 10.9x
10.2x 10.5x
10.0x 9.8x 10.1x 9.8x
9.4x 9.7x 9.7x
9.3x 9.1x 9.2x 9.3x
8.7x 8.8x
8.1x
7.5x
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
1
Two-year trailing average EV/EBITDA.
Data source: Capital IQ, Refinitiv LPC
may explain this increase. First, as noted above, an incremental creep from 9x to 11x EBITDA,
megafunds are proliferating. In 2014, $72.5 billion in US buyout multiples increased markedly last year,
PE capital was raised by megafunds, comprising reaching the highest level of the past 15 years
20 percent of that year’s total. In 2019 the figure was (Exhibit 16). An investor in 2019 would have to pay
3x larger, $219 billion, 39 percent of the total. 35 percent more than in 2010 to acquire the
same company. It has become vanishingly rare
Larger funds tend to pursue larger deals. This to see a private market firm write multiple expansion
is true both for buyout funds as well as for VC and into its investment case. To the contrary, we
growth vehicles. We first noted this trend last see more firms underwriting deals that assume
year in VC, which saw a record number of “supersized” some degree of multiple contraction—putting
rounds (25) exceeding $1 billion. In 2019, VCs more pressure on themselves to enhance portfolio
placed 14 rounds of more than $1 billion, as young company earnings.
companies continue to eschew traditional public
market financing in favor of large private investments. Meanwhile, GPs used more leverage to finance
(The value of PE-backed IPOs dropped by roughly these ever-pricier purchases: pro forma leverage for
one-third in 2019, from $163 billion to $110 billion, US buyouts increased to 6.6x, up from 6.45x in
according to data from Pitchbook.) 2018 and even higher than 2007’s precrisis peak of
6.5x. The share of all buyouts with a gearing of
less than 5x, furthermore, declined to a multiyear
Multiples and leverage continue to rise low, at just 7 percent.
A second factor in the growth of deal size has been
the steady upward march of purchase multiples, Private and public market earnings multiples are
which increased every year of the past decade. After highly correlated, of course, and public market
22 A new decade for private markets McKinsey Global Private Markets Review 2020multiples remain near a multidecade high. But in the decade. Of course, some big tech plays have
past five years US buyouts have gradually closed done poorly. But the larger trend is intact. This
a historical valuation gap to US small cap equities, growth in tech and tech-related deals is
which traded at only a 1.5x premium to buyout putting upward pressure on average multiples,
transactions in 2019, the lowest since 2013. given that the margin and growth profiles
of technology companies typically merit higher
When it comes to multiples, of course, sector matters. valuations. All else being equal, that shift should
PE has grown increasingly tech-heavy, driven by stay on track.
meaningful growth in tech-focused firms and funds
but also more broadly by a recognition among
traditional firms that technology is a growing factor Dry powder: No signs of slowing down
in most transactions. Last year, tech-focused Once again, private managers’ dry powder rose
GPs accounted for nearly 20 percent of capital raised last year, hitting a record high of $2.3 trillion in H1
by PE funds in Europe and North America, 2019, up from $2.1 trillion at the end of 2018
according to data from Pitchbook. A decade ago, (Exhibit 17). Dry powder has grown at a rate of almost
none of the ten largest PE firms were explicitly tech- 14 percent annually since 2014, in part because
focused; by 2019, two invest solely in technology of the rise of megafunds, particularly in PE. At
companies. (The two are among five new entrants $1.4 trillion, PE dry powder accounts for 60 percent
to the top ten.) More than one name-brand of the total. The largest alternative asset class has
firm has begun reconceptualizing its tech/software also been the fastest-growing, adding 16 percent in
“vertical” or sector team in favor of a view of dry powder annually since 2014.
technology as a horizontal theme that cuts across
McKinsey 2020 every vertical. Tech returns have been strong— Viewed as a multiple of average annual equity invest
Global Private Equityaccording
MarketstoReview
Burgiss data, tech-focused PE funds ments over the prior three years, dry powder
have generated IRRs six percentage points inventories have crept higher, growing 31 percent
Exhibit 17 of 38
higher than those of nontech funds in the last since 2016, though these levels are not far from
Exhibit 17
Stocks of dry powder reached a new high.
Global capital committed and not deployed, 2000–H1 19, $ billions
2014–H1 19 2018–H1 19
CAGR, % growth, %
2,400
Total 13.9 11.6
2,000
Private equity 15.8 15.4
1,600
Real estate 12.0 3.4
1,200 Private debt 12.3 1.6
800 Infrastructure and 9.9 16.0
natural resources
400
0
2000 2002 2004 2006 2008 2010 2012 2014 2016 H1 2019
Data source: Preqin
Running hotter 23Global Private Equity Markets Review
Exhibit 18 of 38
Exhibit 18
Inventories of dry powder have increased in recent years.
Years of global PE inventory on hand,1 turns
2.5
2.0
+31%
1.5
1.0
0.5
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H 2019
1
PE capital committed but not deployed, divided by trailing 3-year average PE equity deal volume.
Data source: PitchBook; Preqin
historical norms (Exhibit 18). In North America, dry firms from 2010 remained in the top 10 in 2019. It’s
powder inventories grew 19 percent over the hard to stay on top. As noted, two of the five
same time range, suggesting that GPs there are new firms are tech-focused, and all five have strong
deploying a greater share of available capital than tech investing capabilities—consistent with
their counterparts elsewhere. technology becoming a particular area of focus
for PE investors.
Industry structure: Rapid turnover, Second, the number of active PE firms has continued
but little consolidation to increase every year, nearly matching the number
Despite the rise of large funds in recent years, of hedge funds (Exhibit 20). In 2019, nearly 6,700 PE
relative market concentration in PE has remained firms had raised at least one fund in the previous
remarkably steady: since 2011, the top five seven years, up from 4,100 five years earlier.
fundraisers have consistently accounted for
8 to 9 percent of all fundraising, and the Third, while many new PE firms form every year, the
top 250 have accounted for around 65 percent rate of attrition has been increasing. Prior to
(Exhibit 19). 2010, two percent of firms became inactive each
year—that is, they had gone seven years without
Nonetheless, the industry has evolved in a few a fundraise. Since 2010, that rate has doubled
noteworthy ways. First, membership in the top-ten to four percent. Nearly 60 percent of inactive firms
club has changed. Only half of the largest 10 PE today only raised a single fund, supporting the
24 A new decade for private markets McKinsey Global Private Markets Review 2020Global Private Equity Markets Review
Exhibit 19 of 38
Exhibit 19
Market concentration has remained remarkably steady.
Trailing five-year cumulative fundraising, % of total Private
manager cohort
9 9 9 9 8 8 9 8 8 Top 5
6 6 5 5 6 5 6 5 6 Top 6–10
10 10 9 10 12 11 12 Top 11–25
12 11
22 23 24 22 22 24 22 Top 26–100
21 23
18 18 18 18 17 17 16 Top 101–250
18 16
34 35 36 35 36 36 35 36 37 251+
McKinsey 2020
Global Private Equity Markets Review
Exhibit
2011 20 of2012
38 2013 2014 2015 2016 2017 2018 2019
Data source: Preqin
Exhibit 20
By the numbers: PE firms have grown steadily while hedge funds remained steady.
PE firms and hedge funds 2005–19, number
12,000
10,000
Hedge funds
8,000
Active PE
6,000 firms1
4,000
2,000
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
1
A firm is considered active if it raised a fund in the previous 7 years.
Data source: Preqin, HFR Global Hedge Fund Industry Report
Running hotter 25conventional wisdom that new funds have a higher In other private markets, some degree of con
failure rate than funds with at least two raises. solidation is undeniable. The larger players
So, even with more new managers forming and more have actively deployed their institutional (and retail)
folding than ever, it remains true that those that platforms across more capital by adding
prove themselves early tend to stick around for the new strategies organically, lifting teams out
long term. of other organizations, or acquiring other
large players outright.
26 A new decade for private markets McKinsey Global Private Markets Review 20203 Looking ahead to the
new decade
Consider the figures for 2019: $900 billion in funds raised; $6.5 trillion
in AUM; $2.3 trillion in dry powder. These numbers may seem remarkable
in isolation but are merely the culmination of a decade of steady
growth—an era when private markets have become more relevant
than ever.
Since 2010, both private markets AUM and the number of PE GPs have
more than doubled, while the number of US sponsor-backed companies
has increased by 60 percent. Over that same period, global public
market AUM has grown by roughly 100 percent, and the number of US
publicly traded firms is roughly flat (but is down nearly 40 percent
since 2000).
27As private markets settle in to their newfound status, ESG comes to private markets
three strategic issues for the next decade have An approach to investing that accounts for ESG
come to the fore. First, growing pressure from LPs factors has been perhaps the most talked
and from the public is pushing environmental, social, about development of the past several years.10 As
and governance (ESG) considerations to center public awareness of and activism relating to ESG-
stage. In light of the sharp focus on ESG, GPs are driven investing have soared, many prominent
reevaluating some of their diligence processes and allocators to PE have taken up the cause. They now
portfolio choices. require GPs to pass an ESG screen as part of
their vetting process, and demand more transparency
A second strategic issue is diversity and inclusion. into ESG policies, procedures, and performance
While GP performance on these measures has of portfolio assets. Collective action among LPs has
improved modestly in recent years, it is still low by any increased in recent years; see for example the
objective measure. Private markets are immersed Investor Leadership Network, which was formed
in a war for talent and cannot win by excluding whole in 2018 to coordinate ESG efforts among insti
categories of people from due consideration. tutional investors, and now represents more than
$6 trillion in capital. In some regions, furthermore,
Third, digital approaches and advanced analytics regulations have become a forcing mechanism.
are another transformative force that will shape Europe recently adopted a sustainable finance
private investing in the 2020s. New analytical tools action plan that requires asset managers to
will likely have more influence on investment disclose how they account for ESG factors. Finally,
decisions in some asset classes, as firms seek an increasing body of evidence indicates that
distinctive sources of insight. Adoption of the inclusion of ESG criteria is positively related
these techniques remains fairly limited for now. to corporate financial performance. A meta-
Some managers, in some asset classes, have begun analysis of more than 2,000 primary studies found
to embrace new techniques, while most are still that 63 percent show positive results, while only
figuring out how to incorporate these new tools and 8 percent reported negative impact.11
approaches into their investment processes.
The positive relation between ESG and financial
The coming decade will also present unforeseen performance is typically attributed to reduced levels
challenges. But firms that get their house in order on of risk: though there is not yet consensus, several
the strategic issues of the day will be better situated studies estimate that the presence of ESG
when the next set of problems arrives. concerns can increase an asset’s cost of capital by
An increasing body of evidence
indicates that the inclusion of
ESG criteria is positively related to
investment performance.
10
See for example Sara Bernow, Jonathan Godsall, Bryce Klempner, and Charlotte Merten, "More than values: The value-based sustainability
reporting that investors want," McKinsey on Investing, Number 5, August 2019, McKinsey.com.
11
Gunnar Friede, Timo Busch, and Alexander Bassen, “ESG and financial performance: Aggregated evidence from more than 2,000 empirical
studies,” Journal of Sustainable Finance & Investment, Volume 5, Issue 4, December 2015, ssrn.com.
28 A new decade for private markets McKinsey Global Private Markets Review 2020You can also read
