Are you exploring the future or just visiting? - 2021 Global Private Equity Survey
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Are you exploring the future or just visiting? Private equity firms have navigated the challenges of 2020 relatively well. But they can’t stop now. Leaders must be nimble and adaptable and embrace uncertainty. 2021 Global Private Equity Survey
2021 Global Private Equity Survey
WITH OUR
A P PR ECIATION
“
We would like to express
our appreciation to the 127
private equity COOs, CFOs
and financial executives who
offered us their valuable
insights and observations.
We believe these insights
will assist stakeholders in
making informed decisions
as they continue to evolve
into the private equity firms
of the future.
1
2021 Global Private Equity Survey
EXECUTIVE
SUMMARY
Private equity CFOs have Private equity firms and their CFOs also adjusted to the new workflows
made the move to a remote working and continued to meet critical
addressed numerous environment with relative ease, milestones.
challenges over the past few thanks in large part to the foundation
Now, as they look to 2021 and
they had built to revamp their
years as they have moved the future, CFOs say they are
operating model and modernize their
planning to double down on their
beyond the traditional role of IT infrastructure.
past bets in technology and people
finance executive. But until Those past decisions helped CFOs and to continue expanding their
last year, they had yet to be successfully navigate the disruption scope to focus on new areas such
of the COVID-19 pandemic, ensuring as sustainable investing and to
tested by a crisis as profound that they had the digital tools and further initiatives in diversity and
as the COVID-19 lockdowns, mindset to set up virtual investor inclusiveness (D&I). Indeed, the
meetings and conference calls as they ability for CFOs to stake a leadership
which forced firms, investors
continued to raise capital and identify role to help their firms navigate a
and target companies alike target companies. While investment rapidly changing landscape of the
to shift to virtual operating activity dropped slightly in the 2Q and private equity industry has never
3Q of 2020, overall private equity been more important.
models overnight. activity barely skipped a beat, which
We invite you to read more about
stands as an incredible achievement
the insights we captured on their
considering the adjacent social and
response to the events of 2020
political uncertainty the US and the
and to their strategic journey going
world faced in 2020. At the same
forward in the 2021 Global Private
time, their back-office operations
Equity Survey.
2
2021 Global Private Equity Survey
C H APTE R 1
The COVID-19 impact on
private equity, now and in
the future landscape
3
2021 Global Private Equity Survey
CHAPTER 1
The economic aftershocks of the COVID-19 pandemic firms that had yet to challenge the flexibility of their
touched virtually every organization across the workforce had no choice. CFOs, for most firms, noted
world. Private equity firms were no exception. In that the transition was fairly seamless as they were
the short term, most firms adapted successfully to a already moving to create more flexible remote work
remote working environment. The long-term impact arrangements. This enabled them to quickly adapt
on the private equity industry as well as its portfolio their work setting, including the amount of office size,
companies, of course, is still unfolding. In this new layouts to accommodate social distancing and office
environment, the private equity CFO and finance team locations. Forward-looking firms recognized this as an
have an opportunity to act as agents of change and opportunity to improve and redefine their operating
take advantage of the opportunities the pandemic has model. At the same time, firms also had to quickly
presented and influence the future of work in their shift to virtual investor meetings, including annual
organization. meetings with limited partners (LPs), adding another
layer of complexity for connecting with existing and
The COVID-19 pandemic accelerated the digital
new investors in the pandemic environment and
transformation of private equity firms by forcing
beyond.
them to operate in a remote environment. Those
The impact of COVID-19 on private equity
How has your firm responded to the impact of COVID-19?
What was the largest impact COVID-19 had on your firm?
PE (125)
Moved to a remote workforce 60%
Challenged office size, layout and location 50%
Held annual meetings virtually 46%
Monitored employee health 26%
Redesigned processes for virtual
26%
fundraising and due diligence
Reduced expenses, including less travel 26%
Ranked top three priority
4
2021 Global Private Equity Survey
CHAPTER 1
Supporting a remote workforce
and enabling large-scale virtual
meetings require state-of-the-art
technology. Private equity firms’
major investments in technology
over the past five years positioned
them to respond promptly to
these challenges. Firms that
could leverage the technology
in the back office to manage the
mandated remote workforce were
better equipped to weather the
storm until they could reopen
offices. Looking ahead, CFOs said
they would continue to reinforce
technology investment and adjust
flexible work schedules as they Q12
took further actions to enable a
What
What aredoing
are you youtodoing to manage
enable and enable a more
a more remoteremote
workforce?workforce?
remote workforce. Firms should
rightly view this as a successful
return on investment and focus
on building upon their success
Improving technology 63%
to guide how their organization
operates in a post-pandemic
environment. Flexible work schedule 57%
Individual check-ins by upper management 43%
Redesigning workflows 24%
Training on remote work best practices 9%
PE (127)
5
2021 Global Private Equity Survey
CHAPTER 1
In addition to helping their remote workforce challenges represents the next step in developing
meet day-to-day responsibilities through frequent the future of work in the post-COVID-19
check-ins, flexible schedules and enabling environment, especially as employees will likely
technology, firms with a forward-looking lens expect this continued flexibility as offices start
also took steps to focus on talent management to reopen their doors and find their path forward
by seeking to sustain firm culture, developing once business and society find a post-pandemic
and training their people, and monitoring equilibrium. Innovative firms that respond to
mental health of employees. These are areas of these hurdles will have a competitive advantage in
significant risk of a remote workforce and some of attracting and retaining the best front- and back-
the drawbacks of remote working. Tackling these office talent in a post-pandemic work environment.
Q14
What
What do are
you see thebiggest
as the biggest risks offrom
risks resulting a more remote
a more remote workforce?
workforce?
Inability to train employees as quickly
76%
and provide important mentoring
Deterioration of firm culture 74%
Less in-person contact with investors 33%
Lack of productivity 30%
Less engagement on firm initiatives 28%
PE (127)
6
2021 Global Private Equity Survey
CHAPTER 1
Q21CWhat percentage of time do you expect each of these functions will
spend working remotely after COVID-19 conditions subside?
What percent of time do you expect each of these business units will work remotely after
conditions normalize post-COVID?
Private equity CFOs have
acknowledged this shift, noting
that they anticipate that, in a
Compliance and regulatory reporting 35%
post-COVID-19 workforce, most
employees will want to continue
Fund accounting 34%
to work remotely, at least to
some extent. Across the board Tax 34%
in almost all functional areas
surveyed, firms expect employees Marketing/investor relations 33%
to work remotely approximately
30% of the time (or roughly one Middle office (including treasury) 32%
or two days in a typical five-day
workweek) as firms return to Valuation 31%
their physical locations. Private
equity firms have acknowledged Portfolio company analytics 31%
this paradigm shift in future
operating models, with a minimal Investment professionals 30%
group across firm sizes expecting
operations to return as they
Total PE (105)
were pre-COVID-19. Conversely,
greater than 80% of firms of all
sizes expect at least a moderate
change required for future
operating models. Private equity
In
Q15 the next three years, how much would you expect
firms with the proper forward- your operating model to be transformed as a result of
In the next 2-3 years, how would you expect your
looking mindset will be regarded insights gained during COVID-19?
operating model to be permanently transformed
as leaders in developing the future as a result of COVID-19?
of work, but they must back this
up by acting on this opportunity
10% 6% 8% 2% 5%
as it is presented in the coming 15%
year, including continuing
Over Under
flexible work arrangements $2.5b–$15b
$15b $2.5b
and other accommodations to
which employees have become
84% 90% 80%
accustomed with a fully remote
work arrangement.
Significantly
Moderately
No change
7
2021 Global Private Equity Survey
CHAPTER 1
Private equity managers similarly needed to adjust their How has remote working impacted
interaction with investors as a result of the COVID-19 Q9
engagement between managers and
environment. Not only did firms’ investment in technology How Remote Working Impacted Managers’
investors?
pay off in supporting internal operations, but it also paid Ability to Engage with Investors
dividends on the investor front. Some 66% of private
equity firms noted minimal disruption to all investor
relationships as a result of the remote environment. The Major disruption to all 2%
previous investment in building out LP portals allowed for relationships (prospective and existing)
4%
continued access by investors to information. At the same
time, firms relied on virtual tools to meet with prospective Major disruption to prospective 30%
relationships but minimal impact
investors. Some firms, approximately 30%, said this to existing relationships 16%
delivered a significant impact on prospective relationships
Major disruption to existing 2%
with a minimal impact on existing ones. This again presents relationships but minimal impact
an opportunity for these firms to challenge traditional to prospective relationships
methods of their business to continue to compete for
26% 66%
capital in this environment; firms cannot afford to lose a Minimal disruption to all relationships
80%
step here since fundraising across the industry has carried
its strong growth trajectory through the pandemic. Private equity
managers
Investors
8
2021 Global Private Equity Survey
CHAPTER 1
Private equity managers and investors are
somewhat split on the long-term impact of
COVID-19 on the marketing process. Most
firms, close to 50%, believe there will only be
a temporary change to the marketing process.
We had slightly divergent views among private
equity managers and LPs. Some 43% of private
equity managers note that there was likely to
be a more permanent shift, while 30% of LPs
expected no change at all. Interestingly, larger
firms (63%) expected a more permanent shift
in marketing activities than smaller managers
(30%). This contrasting view between firm sizes
and LPs suggests that there needs to be more
transparency between these groups to achieve
fundraising and marketing goals going forward.
Q10
How do private equity managers and
How do PE managers and investors view the COVID
investors view the COVID-19 impact
impact on marketing activities?
on marketing
PE Managers activities?
by Size
34%
Permanent 43% 48%
shift 25% 56%
63%
Temporary 47%
40%
change 45% 30%
3%
No change 10%
12%
at all 30%
14%
Private equity Over $15bn
managers
$2.5-$15bn
Investors
Under $2.5bn
92021 Global Private Equity Survey
C H APTE R 2
Talent
management and
operations
102021 Global Private Equity Survey
CHAPTER 2
Over the last two years, private equity managers have consistently ranked asset growth and talent management as their
top two strategic priorities. While other areas of focus such as environmental, sustainability and governance (ESG) and
technology-related priorities may emerge or ebb and flow, most organizations believe that finding and retaining talent that
advances their strategy and business model remains a key factor to succeed at asset growth.
e funds/Private Equity
From the following list, please rank the top 3 strategic priorities for your firm.
trategic Priorities
What are — PE
your top strategic priorities?
Over $15b 75%
Asset growth $2.5b–$15b 75%
Under $2.5b 72%
Over $15b 56%
58%
Talent management $2.5b–$15b
Under $2.5b 53%
Over $15b 41%
ESG initiatives $2.5b–$15b 29%
Under $2.5b 14%
Over $15b 25%
Enhancing back-office 27%
$2.5b–$15b
processes and technology
Under $2.5b 26%
Over $15b 25%
$2.5b–$15b 8%
Front-office technology transformation
Under $2.5b 2%
Over $15b 22%
$2.5b–$15b 23%
Cost management
Under $2.5b 30%
Over $15b 3%
$2.5b–$15b 21%
Succession planning
Under $2.5b 21%
112021 Global Private Equity Survey
CHAPTER 2
In comparing results of this survey with prior surveys, of private equity managers to deploy technology or process
we observed a slight shift in the priorities at the overall initiatives over the past two years, which has allowed
organizational level to the talent management front. In private equity managers to redirect their focus to their
the past, managers’ top priority for talent management people. While gender and ethnic minority representation
focused primarily on enhancing middle- and back-office were focuses in the prior year, private equity managers
processes. Now that technology and processes are in have shifted even more to address the composition of their
place, firm managers are focusing more on applying talent talent pool with regard to gender and underrepresented
management as a lever to drive employee productivity and minorities.
Q20
engagement. This largely reflects the success of the efforts
Hedge funds / Private Equity
Q20. In rank order, which of the following are your firm’s three most important talent management priorities?
Talent management priorities
What
Private are your top talent management priorities?
Equity
2021 2020
Increasing gender
56% 47%
representation
Improving employee
productivity 55% 73%
Increasing ethnic
minority representation 52% 31%
Creating a more
inclusive culture 43% 37%
Improving employee
34% 29%
retention
Increasing ability to work
25% N/A
from home/remotely
Hiring more technologically
14% 28%
savvy employees
122021 Global Private Equity Survey
CHAPTER 2
Q24A
From a gender perspective, firms reported making just What proportion
Hedge funds of the members of your
/ Private equity
slight progress, with an increase of only 1% reporting that firm
Q24A. are women?
Approximately what proportion of employees in your front office, as
at least 30% of their employees in the front office are
women. At the same time, firms reported a 6% increase in Proportion of employees who are women
respondents indicating that at least 30% of their back-office
employees are women. Even though gender representation Front office Back office
in the front office still lags, 46% of private equity managers 5%
said at least 50% of their back office comprises women. 8%
6%
10%
To remedy this imbalance in the front office, some private 34%
equity managers may want to make a concerted effort to 2021 2021
increase the number of women in front-office roles, relying
46%
on the similar formula they used to improve back-office 38%
53%
representation.
2%
10% 3%
20%
35%
41%
2020 2020
53% 36%
Greater than 50% 10%–30%
31%–50% Under 10%
132021 Global Private Equity Survey
CHAPTER 2
With the incremental progress they’ve made in gender diversity, private equity managers will need to focus even
more time and attention on improving the representation of underrepresented minorities in both the front office
and back office. Most firms recognize that they have a long way to go. Some 75% of the respondents indicated that
less than 10% of their front office comprises underrepresented minorities, while 60% said minorities accounted for
less than 10% of their back-office staff. While managers with over $15 billion in assets under management reported
greater representation than smaller managers, managers of all sizes have a long way to go to increase diversity.
Q24B
Hedge funds / Private equity
Q24B. Approximately what proportion of employees in your front office,
What proportion
as well as of office,
outside the front the members of your
are underrepresented firm are
minorities underrepresented
(i.e., Black and Latinx)? minorities?
Proportion of employees who are underrepresented minorities
Over $15b Over $15b
4%
7%
4% 7%
Front office Back office 47%
26%
2% 3%
66% 39%
6% 8%
17%
$2.5b–$15b $2.5b–$15b
29% 2%
7%
7%
17% 24%
80%
75% 80%
60%
76% 67%
Greater than 50% Greater than 50%
31%–50% Under $2.5b 31%–50% Under $2.5b
3%
10%–30% 6% 10%–30% 9%
11%
Under 10% Under 10% 26%
80% 65%
142021 Global Private Equity Survey
Q23AB Q23AB
Hedge funds Hedge
/ Private Equity
funds / Private Equity
Q23A. WhichQ23A.
of the Which
following bestfollowing
of the describes your
best current your
describes diversity anddiver
current incl
CHAPTER 2 Q23B. WhichQ23B.
of the Which
following are following
of the componentsare of your current
components D&I initiative
of your current D
Current diversity anddiversity
Current inclusiveness initiatives initiatives
and inclusiveness Components Com
of cu
33% Imp
33%
To that end, more firms recognize that they need to Which of the32%
following best
32% during pro
improve minority representation and over 70% of the describes your current diversity and Provide training on bi
Provide
private equity managers surveyed said they are launching
inclusiveness initiatives? Sponsor
either documented or informal D&I initiatives. Of these, within t
35% 35%
two out of three managers have used increased awareness Provide in
during the promotion process and inclusivity training a
as components of their diversity initiatives. To a lesser Create neutralC
that focus
degree, some managers are looking to modify their hiring 26% 26%
32% 32% Expand recruiting at colleges
Expand recruitin
practices. These new practices aim to provide candidates with a significant
withamo
as
with a diverse interview panel and offer anti-bias training Create divers
use dive
to interviewers. In addition, managers are increasing their
exposure to diverse candidates by expanding recruiting 42% 42% Set formal d
at colleges and universities with a significant amount of
Review diversity an
Revie
diversity. Focusing on diversity will continue to stand at policies of third
po
Documented diversity
Documentedand inclusiveness initiatives
diversity and inclusiveness initiatives
the forefront as 85% of managers have indicated that the
effectiveness of their suite of diversity and inclusiveness Informal diversity and inclusiveness
Informal initiatives
diversity and inclusiveness initiatives
initiatives will have a direct impact on diversity within their Do not have diversity and inclusiveness
Do not have initiatives
diversity and inclusiveness initiatives
organization and on organizational culture or DNA.
Total T
152021 Global Private Equity Survey
CHAPTER 2
t describes your current diversity and inclusiveness initiatives?
components of your current D&I initiatives?
Which of the following are components of your
ss initiatives currentComponents
diversityofand inclusiveness
current initiatives?
diversity and inclusiveness initiatives
Improve awareness 62%
during promotion process
Provide training on bias and inclusion 59%
Sponsor diversity groups
within the organization 38%
Provide interviewers with
anti-bias training 38%
Create neutral job descriptions
that focus on deliverables 36%
Expand recruiting at colleges and universities
with a significant amount of diversity 34%
Create diverse hiring panels/
use diverse interviewers 29%
Set formal diversity targets 29%
Review diversity and inclusiveness
policies of third parties/vendors 16%
usiveness initiatives
ness initiatives
siveness initiatives
Total
162021 Global Private Equity Survey
CHAPTER 2
In addition to diversity initiatives, private equity COOs and CFOs oftentimes maintain responsibility for determining which
functions should be performed in-house. For various reasons, more managers have begun to shift various core, routine
functions into outsourcing arrangements, which continues to be most prevalent for the fund accounting and tax functions.
This is especially true of smaller firms that may have financial constraints that challenge their ability to have a large and robust
internal workforce of which larger, more established private managers have the luxury. However, private equity firms of all
sizes are showing more comfort with outsourcing the traditional and more routine back-office functions, while still displaying
resistance to using outsourcing providers in front-office functions such as portfolio analytics. As private equity managers
continue to grapple with fee pressures and increased competition, however, the option of using outsourced providers for front-
office
Q16 functions might also be an area of opportunity for savings.
Private Equity
What iseach
Q16. For your level
of the of outsourcing?
following functions, please rate your organization’s level of outsourcing using the following scale:
Components of current diversity and inclusiveness initiatives
Over $15b $2.5b–$15b Under $2.5b
Investor 94% 6% 98% 2% 81% 7%
relations
12%
Portfolio 3% 2%
analytics 94% 94% 90% 10%
3% 4%
Valuation 3% 5%
88% 12% 87% 86%
10% 9%
Accounts payable/ 7% 7% 11%
time and expense 84% 85% 84%
9% 8% 5%
Regulatory
reporting 78% 22% 63% 29% 8% 49% 37% 14%
Fund
accounting 56% 25% 19% 52% 35% 33% 19% 48%
13%
Tax 22% 44% 34% 19% 35% 46% 12% 26% 62%
Limited or no outsourcing
Equal mix of in-house resources and outsourcing
Primarily outsourced
172021 Global Private Equity Survey
CHAPTER 2
Our survey results also indicate that larger managers
are using automation as a tool to increase internal
operational efficiency. Due to the prevalence of
outsourcing used by smaller managers, it seems less
likely they would rely on investment for their own
internal automation. That might also be due to the fact
they may not have adequate resources or expertise
for developing their own automated solutions.
Compared with other alternative asset classes such
as hedge funds, private equity managers still remain
behind their peers in automating their core business
operations.
Q17
Q17
Hedge funds / Private Equity
Q17.funds
Hedge Using/ the following
Private scale, which of the following best describes the level of automation for processes that are
Equity
How
Q17. automated
currently
Using conducted
the following are
houseyour
inscale, which finance
in each
of of
thethe functions?
following
following functional
best areas
describes (e.g., of
the level excluding any for
automation automation bythat are
processes
your service
currently providers)?
conducted in house in each of the following functional areas (e.g., excluding any automation by
your service providers)?
Automation process currently conducted in house
Automation process currently conducted in house
Fund
accounting Over $15b
Fund
accounting Over $15b
$2.5b–$15b
Middle office
(including treasury) $2.5b–$15b
Under $2.5b
Middle office
(including treasury) Under $2.5b
Hedge funds
Valuation
Hedge funds
Valuation
Tax
Tax
Regulatory reporting
Regulatory reporting
Marketing/investor
relations
Marketing/investor
relations
Nothing is Equal mix of Entirely
automated manual and automated automated
Nothing is Equal mix of Entirely
automated manual and automated automated
182021 Global Private Equity Survey
C H APTE R 3
Environmental,
social and corporate
governance
192021 Global Private Equity Survey Private equity investors have an incre
Investors
Private equity investors have an increasing demand for ESG pr
Do you invest in ESG products?
Investors
CHAPTER 3 Do you invest in ESG products?
Yes
51% 49%
No
Investors no longer see investments based on ESG as three years. Only about half of theYes investors surveyed felt
51% 49%
a trade-off. In other words, they are no longer willing that there were enough ESG offerings No to meet their needs.
to accept weaker performance related to more ethical As such, ESG offerings are likely to continue growing to keep
How do you expect the amount of ESG inves
investment decisions as they will increasingly seek to build pace with investor demand. This partly reflects an evolving
via the
forfollowing alternative asset classes t
well-performing socially responsible portfolios.Private
Roughlyequity
half investors
investor have an increasing
base that demand
is more conscientious ESG products
about how its
the next 2 to 3 years?
of investors surveyed currently invest in ESG products and behaviors,
How including investment
do you expect activities,
the amount can leadyou
of ESG investing to better
do Do you feel t
Investors
almost half of investors expect their ESG investing in private social and environmental
via the behaviors.
following alternative asset classes to change in your needs i
Do you invest in ESG products?
equity and venture capital to increase over the next two to the next 2 to 3 years? Private equity/ Private
venture capital 14% 33% 4
ventur
Private equity/
33% Infrastructure 14% 28%
How 51%
do investors
49% view ESG?
Yesventure capital
14% 44% 9% 48%
No
Infrastructure 14% 28% Real estate/
53% 5% 10% 38%
Private equity investors have an increasing demand for ESG products real assets Real
real a
Do you invest in ESG
Private
Private equity products?
equity investors
investors have
have anHow dodemand
increasing
an increasing you expect
demand the
for ESG
for ESG amount of ESG investing
products
products
Investors Real estate/ 10% 38% Hedge43% funds 9%6% 24% 52
Do you invest in ESG products? How doyouyoudo viathe
expect the following
amount of ESGrealalternative
assets you do asset
investing classes
Do you feel thereto 39%
are enough ESG offeri
Investors
Investors
Do invest
Do you you invest in ESG
in ESG products?
products?
change
via the following in the next
alternative assettwo to tothree
classes changeyears?
in your needs in the next 2-3 years?
the next 2 to 3 years? Hedge funds 6% 24% 52%Credit 18%
5% 33%
Private equity/
venture capital Infrastructu
Cr
equity investors have an increasing demand
Yes for ESG products
51% 49% Credit 5% 33% 51% significantly
Increase 11%
Private equity/ 31% No c
No
Yes Yes venture capital 14% 33% 44% 9% 48% 52% 46%
51% 51% 49% 49% Increase Dec
69%
No No
vest in ESG products? Increase significantly No change
Infrastructure 14% 28% 53% 5% Real estate/
Increase Decrease
real assets Hedge fund
emand for ESG Howproducts
do you expect the amount of ESG investing you do Do you feel there are enough ESG offerings to meet
via the following alternative asset classes to change Real
yourestate/
in investing needs 10% 38% years?43% 9%
Yes HowHow do expect
do you you expect the amount
the amount of ESG
of ESG investing you doin Do
youassets
real do
the next
you
2-3feel
Do feel
you therethere are enough
are enough ESGESG offerings
offerings to meet
to39%
meet 32%
49% the next 2 to 3 years? 61%
via following
the following alternative asset classes to change in equity/ 68%
No via the alternative asset classes to change Private
in youryour
needs needs
in thein next
the next 2-3 years?
2-3 years?
the next venture6%
Hedge funds capital
24% Infrastructure
52% 18%
the next 2 to 23 to 3 years?
years? Private equity/
Private equity/
Private equity/ venture
venture capital
capital Infrastructure
Infrastructure
31% Credit
venture capital 14% 33% 44% 9% 48% 52%
Private
Private equity/equity/ Credit 5% 33% 51%
69% 11% Yes
venture
do capital 14%feel
14%you 33% 33% are 44% 44% ESG9% 9% 31% 31%
ou expect the amount of ESG investing you
venture capital Do there enough 48% 48%
offerings to meet 52% 52% 46% 54%
Infrastructure 14% in28% your needs 53%in the
5%next 2-3 years? 69% 69% No
llowing alternative asset classes to change Real estate/
2 to 3 years? Infrastructure Increase real
significantly
assets No change
Hedge funds
Infrastructure 14% 14% 28% 28%
Private equity/ 53% 53% 5% 5% Real Real estate/
estate/
Real estate/ 10% 38% venture
43% capital
9% Infrastructure
Increase realDecrease
real assetsassets HedgeHedge
fundsfunds
real assets 39% 32%
61%
ivate equity/ Do you feel thereReal
44% are enough ESG 38%offerings to 9%meet
31%9% your needs in
Real estate/
estate/ 10% 10% 38% 43% 43% 68%the next two to three years?
nture 14% 33% 9% 39% 39% 61% 32% 32%
do capital
Do you feel there are enough ESG real assets
offerings to meet 48% 52%
real assets
61%
Hedge funds 6% 24% 52% 18% 69% 68% 68%
in your needs in the next 2-3 years?
Hedge Hedge
fundsfunds 6% 24%
6% 24% 52% 52% 18% 18% Credit
frastructure 14%Private28%
equity/ 53% 5% Real estate/
venture capital Credit 5% 33%
Infrastructure 51% 11%
real assets Hedge funds Credit Yes
Credit
Credit
Credit 5% 5%33% 33% 51% 51% 11% 46%
11% 54%
Real estate/ 10% 38% 43% 9% No Yes Yes
9%real assets 31% 39% 32%
48% 52% 61% 46% 46%
54% 54%
Increase significantly69% No change 68% No No
Hedge funds 6% 24% Increase52% Increase
Increase
18% Decrease
significantly
significantly No change
No change
5% Real estate/
Increase
Increase Decrease
real assets Hedge funds Credit Decrease
Credit 5% 33% 51% 11% Yes
9% 20
39% 32%
61% 46% 54%
68% No
Increase significantly No change2021 Global Private Equity Survey
CHAPTER 3
Private equity managers in the
keeping up with investor dema
ESG Products
Do you offer ESG strategies to inves
66%
Private equity managers in the US are not
keeping up with investor demands for
28%
ESG Products
Many investors attracted to ESG strategies believe that Do you offer ESG strategies to investors? 17%
this strategy will tap into investments that outperform Do you offer ESG strategies to investors?
6%
the general market. In addition, more people —
particularly millennials and Generation Z — consider North Europe A
66% 67%
social and environmental impact a key element in their America
investment decisions. While managers in Europe and
Asia are meeting this demand, managers in North Currently offer
America are lagging behind, though we anticipate an 28% Plan to offer
effort to catch up. There is increasing evidence that
17%
ESG investing may enhance performance, which puts
firms that fail to offer ESG strategies at a further 6%
disadvantage as investors seek more sustainable North Europe Asia
investing options. America
Currently offer
Plan to offer
212021 Global Private Equity Survey
CHAPTER 3
Responsibility for ESG at private equity firms
Q28. Who is responsible for ESG priorities?
As ESG issues rise in importance, senior leadership of Who is responsible for ESG priorities?
Responsible for ESG Priorities
private equity firms will play a much more active role
By PE Size
in governance and oversight. While ESG responsibility
within firms varies, the majority of larger firms
41%
have created a task force to lead these activities, Internally created
37%
particularly as ESG factors become more of a fiduciary ESG task force
12%
duty. This requires those with oversight of ESG at
34%
private equity firms to gain a better understanding of
Head of ESG 12%
the business and reputational risks created by ESG 2%
issues and manage those risks accordingly to create
10%
value for their firm and investors.
COO or CFO 15%
To that end, firms are increasingly developing internal 19%
policies that communicate values and commitment 6%
Chief investment officer
to ESG. These policies seek to change the public 10%
or senior portfolio manager
perception that asset managers are solely motivated 19%
by rate of return and will help to build goodwill with 6%
investors, employees and other stakeholders. The Board of directors 6%
majority of the larger private equity firms typically 18%
have a formal ESG policy in place and nearly all 3%
No one is responsible for
European firms report already having an ESG policy setting ESG priorities 20%
in place. While the individual components of the ESG at our organization 30%
policies may vary, by and large they are currently
focused on corporate governance and promoting Over $15b
the ESG activities with investors and within their
$2.5b–$15b
organization.
Under $2.5b
222021 Global Private Equity Survey
CHAPTER 3
ESG Policies and Procedures
Who has an ESG policy?
Who has an ESG Policy Components
Establishing a corpor
Europe 92%
responsibility governance
Regular external
Asia 67%
on ESG
Promoting employee par
North America 64%
in nonprofit
Implementing policies to redu
Over $15b 85%
footprint/energy con
Adhering to external global sus
$2.5b–$15b 64% initiatives (such as prin
responsible in
Under $2.5b 58% Reviewing third parties’/vendors’ ES
Participating in local a
partnerships to promote ESG
ESG Policies and Procedures Purchasing carb
Components of ESG policies
Who has an ESG Policy Components of ESG policies
Currently have
Establishing a corporate social
Europe 92% 50%
responsibility governance structure
Regular external reporting
Asia 67% 38%
on ESG initiatives
Promoting employee participation
North America 64% 29%
in nonprofit activities
Implementing policies to reduce carbon
Currently, only 38% of ESGOver
policies
$15binclude regular 85% 27%
footprint/energy consumption
external reporting on firms’ initiatives to investors.
Adhering to external global sustainability
As investor demands increase for ESG offerings, 64%
$2.5b–$15b initiatives (such as principles for 24%
including reliable ESG reporting from investors, private responsible investment)
equity firms’ reporting will need
Under to be more digestible,
$2.5b 58% Reviewing third parties’/vendors’ ESG policies 23%
customizable and accessible. A number of organizations,
including EY, are seeking to find common ground on Participating in local and global
21%
partnerships to promote ESG initiatives
nonfinancial reporting standards.
Purchasing carbon credits 8%
Currently have
232021 Global Private Equity Survey
CHAPTER 3
In addition, financial regulators are starting to pay
more attention to how ESG risks are assessed, managed
and disclosed. External drivers that include social
consciousness, the “woke” political agenda, intensifying
investor focus and the rising cost of climate change are
rapidly converging to further accelerate the need to
consider these risks in decision-making processes.
The ESG decision making process
How seriously are ESG risks and opportunities
contemplated
Private Equity in the investment decision-
making process?risks and opportunities
How seriously are ESG
contemplated in the investment decision making process?
Very seriously, as we have a
24%
mature ESG policy and process
Very seriously; however,
documentation of ESG 16%
discussion is lacking
With greater focus on ESG from stakeholders, firms Seriously for certain risk areas 28%
are increasingly taking ESG issues into account in
On an ad hoc basis, but investment
the investment decision-making process. While the 26%
return is still most important
majority of the firms in our survey indicated that ESG
risks are seriously or very seriously contemplated Not at all as investment return 6%
is most important
in decision-making, 32% of firms still said they only
consider these risks and opportunities on an ad hoc
basis relative to an investment’s performance or
don’t view ESG risks as important at all. With no one-
size-fits-all approach to how to assess ESG risks and
opportunities, firms are now considering how these
investment decisions will affect both the long-term
value creation for the firm as well as more traditional
shorter-term investment concerns such as individual
fund returns.
242021 Global Private Equity Survey
CHAPTER 3
Investment decision making risks
What are the top ESG risks you include in your
As firms integrate ESG elements in their investment What are the top ESG risks you include in your
decision-making process, those that ignore ESG decision making?
decision-making?
Top ESG Risks
considerations may unwittingly create an investment
portfolio that fails to reflect risk and lacks proper
management and disclosure, which makes returns appear
to be safer than they are. Governance 67%
In the survey, private equity firms ranked governance as
Environmental 47%
the top ESG risk. Better-managed companies are better
equipped to manage risk and capitalize on business
Talent management practices 36%
opportunities. Environmental performance is another
top risk. Decisions that lead to poor environmental
Human rights practices 33%
performance can also harm a company’s reputation,
not to mention its license to operate. As social, political
and cultural attitudes continue to evolve, especially in a Supply chain risks 28%
post-COVID-19 world, supply chain, talent management,
human rights and climate risks are likely to increase. Climate change 25%
The COVID-19 pandemic has heightened awareness of
the role ESG can play in determining a company’s risk
management and resilience.
252021 Global Private Equity Survey
CHAPTER 3
This increasing demand in ESG is also leading to more How are you engaging with limited partners
engagement with investors on this topic. Specifically, Engagement with investors on ESG
on ESG topics?
private equity firms are under pressure to demonstrate How are you engaging with LPs on ESG topics?
they are taking ESG seriously and have a sound
understanding of how they integrate ESG issues into the
investment decision-making process. In that respect, Discussion of ESG policies and 84%
procedures at limited partner 52%
LPs are asking for robust documentation and reporting.
and advisory board meetings 28%
The survey shows that the majority of large private
Inclusion of responsible 34%
equity firms are engaging with investors at advisory investments or ESG clauses in 21%
board meetings. That can’t be said for smaller firms, fund agreements or side letters 40%
where 47% are still not engaging with investors on these
Discussion of ESG policies with LPs 28%
ESG topics at all. With the growing interest in ESG, when making investment decisions 13%
investors are looking to be more frequently engaged by way of opt-out clauses 14%
in investments through appropriate monitoring and
6%
expected reporting from private equity managers. Inclusion of LP screening
criteria during fund formation 12%
5%
9%
We don’t engage with limited 29%
partners on ESG topics
47%
Over $15b
$2.5b–$15b
Under $2.5b
262021 Global Private Equity Survey
BA CKGROUND
AND
METHODOL OGY
The purpose of this study is to record the views and managers from 127 private equity firms. In addition,
opinions of COOs, CFOs and heads of finance at we also interviewed 72 institutional investors
private equity firms around the globe. representing some $1.8 trillion in assets under
management.
Topics include the impact of COVID-19 on the
private equity industry; talent management; process All amounts in the survey are US dollars unless
improvement, including technology; trends related to otherwise stated.
environmental, social and corporate governance; and
For several of the questions, multiple answers were
the future landscape of the private equity industry.
allowed resulting in responses that do not total 100%.
From June to October 2020, Greenwich Associates
conducted telephone and online interviews with
272021 Global Private Equity Survey
BACKGROU ND A ND M ET HO D O L O GY
Respondent-profile
Respondent profile
What are your firm’s total assets
under management?
33% 27% Over $15b
72
NUMBER OF
$2.5b–$15b INVESTORS
Under $2.5b SURVEYED
40%
127
Number of firms surveyed
This survey brings forward the perspective of 127
private equity firms of a wide range of sizes and
complexities that have operations around the globe. FIRMS SURVEYED
GLOBALLY
Europe
North America
Asia
282021 Global Private Equity Survey
CL OSING
A ND EY SURVEY
CONTACTS
In closing ... in the past eight The year 2020 brought even more challenges to these private equity
executives due to the disruption caused by COVID-19. As our survey
years as we’ve conducted this reveals, the job of the private equity CFO and COO and finance
survey, we’ve watched private executives continues to be one that challenges these executives on all
fronts, but even in the most disruptive of environments they continue to
equity CFOs, COOs and
lead and focus on their firms’ strategic priorities.
finance executives proactively
assume greater responsibility
for improving their firms’
overall operations.
292021 Global Private Equity Survey
CLOSING A ND EY SU RV EY C O N TA CTS
Global Americas EMEIA
Andres Saenz William Stoffel Gerrit Frohn
EY Global Private Equity Leader EY Americas Private Equity Leader EY EMEIA Private Equity Leader
Ernst & Young LLP Ernst & Young LLP Ernst & Young GmbH
+1 617 478 4619 +1 212 773 3141 Wirtschaftsprüfungsgesellschaft
andres.saenz@parthenon.ey.com william.stoffel@ey.com +49 6196 996 23932
gerrit.frohn@de.ey.com
Mike Lo Parrino
Assurance Private Equity Leader John van Rossen
Ernst & Young LLP Partner, Strategy and Transactions
+1 212 773 2753 Ernst & Young LLP
michael.loparrino@ey.com +44 20 7951 6026
jvanrossen@uk.ey.com
Kyle Burrell
Partner
Ernst & Young LLP (East) Asia-Pacific
+1 617 375 1331 Tony Tsang
kyle.burrell@ey.com EY Greater China Private Equity
Strategy and Transactions Leader
+852 2846 9616
tony.tsang@hk.ey.com
Luke Pais
EY Asean M&A and
Private Equity Leader
Ernst & Young Corporate Finance
Pte Ltd.
+65 6309 8094
luke.pais@sg.ey.com
30EY | Building a better working world EY exists to build a better working world, helping to create long-term value for clients, people and society and build trust in the capital markets. Enabled by data and technology, diverse EY teams in over 150 countries provide trust through assurance and help clients grow, transform and operate. Working across assurance, consulting, law, strategy, tax and transactions, EY teams ask better questions to find new answers for the complex issues facing our world today. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Information about how EY collects and uses personal data and a description of the rights individuals have under data protection legislation are available via ey.com/privacy. EY member firms do not practice law where prohibited by local laws. For more information about our organization, please visit ey.com. What makes EY distinctive in financial services Over 84,000 EY professionals are dedicated to financial services, serving the banking and capital markets, insurance, and wealth and asset management sectors. We share a single focus — to build a better financial services industry, one that is stronger, fairer and more sustainable. © 2021 EYGM Limited. All Rights Reserved. EYG no. 000570-21Gbl 2010-3600156 BDFSO ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, legal or other professional advice. Please refer to your advisors for specific advice. ey.com
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