Private market assets under management (AUM) grew 10 per cent in 2019 to an all-time high of $6.5 trillion and the increase was across all asset classes, McKinsey & Company said in a report on Tuesday. The report defines private markets as closed-end funds investing in private equity, real estate, private debt, infrastructure, or natural resources and funds of funds.
According to McKinsey & Company's Global Private Markets Review 2020, AUM increased for all asset classes, but it was private equity (PE) that drove most of the increase.
PE grew 12.2 per cent to $3.9 trillion, about 60 per cent of the total, the report said.
The report further noted that the global PE net asset value has multiplied eight times since 2000, almost three times as fast as public market capitalisation, which has grown approximately 2.8 times over the same period.
Going ahead the outlook for continued growth in private market AUM from both traditional and new sources of capital remains strong, McKinsey & Company said.
In 2019, private markets raised $919 billion, roughly in line with 2018's record levels, the report said.
The report further noted that deal volume declined in every region except North America. Following softening deal count and flat deal volume, the average PE transaction in 2019 rose to $157 million, up 14 per cent from the prior year, the report said.
The report further noted that public interest and limited partner (LP) pressure to take environmental, social, and governance (ESG) factors into account in investing has soared, prompting greater transparency on ESG policies and performance as well as a rise in dedicated "impact funds".
Impact funds generate specific beneficial social or environmental effects in addition to financial gains.
Limited partner is a partner in a company or venture whose liability towards its debts is legally limited to the extent of their investment.
Nine of the 10 largest general partner (GPs) now publish annual sustainability reports.
General partner is member of a business partnership who has unlimited liability for debts incurred by the business.
Data cited in this report were produced by McKinsey and by Burgiss, Cambridge Associates, Capital IQ, CEM Benchmarking, Greenhill, Hedge Fund Research, PitchBook, Preqin, Refinitiv LPC, and the World Bank.