Private Placement Insights as of October 31, 2022

Tuesday, November 15th, 2022 and is filed under Industry Reporting

We recently released our October Private Placement Insights report. See the highlights from the report below, or if you are an AI Insight subscriber, log in now to see the entire report.

• 31 new private placements were added to our coverage in October, an increase from prior months as the year-end tax strategies start to come in and strength continues in the non-tax-focused real estate category. Five new conservation funds were added during the month and eleven so far this year, 10% more than last year at this time, while 74 new real estate funds have been added, 126% more than last year. The only category with slower growth on a year-over-year basis is the hedge fund category, which was strong last year as iCapital funds were added.
• Overall, on a year-over-year basis, we have added more funds than last year (+23%), and these funds are targeting a larger amount of capital (+100%). We have also added more than 30 new sponsor relationships across the categories. The increase in volume is indicative of the continued growth in alternative investment options for high-net-worth investors, as well as a focus on education within the space.
• As of November 1st, AI Insight covers 265 private placements currently raising capital, with an aggregate target raise of $31.8 billion and an aggregate reported raise of $10.5 billion or 33% of target.
• Real estate-related funds, including 1031s, Opportunity Zone funds, and non-1031 real estate LLCs, LPs, and private REITs represent the largest component of our private placement coverage at 72% of funds and target raise. Private equity/debt funds represent 13% of funds and 16% of target raise, although this does include 12 private market feeder funds that do not specify an offering target.
• In terms of coverage by general objective, income is the largest component at 61% of funds, while growth and growth & income follow at 21% and 18%, respectively.
• The average size of funds currently raising capital is $120.1 million, ranging from $1.2 million for a specified 1031 exchange fund to $2.5 billion for a private REIT focused on single-family housing.
• 72% of private placements we cover use the 506(b) exemption, 18% use 506(c) and 10% have not yet filed their Form D with the SEC.
• 22 private placements closed to new investors in October and 222 have closed year-to-date. Funds that closed this year have been on the market for an average of 293 days and the 207 funds reporting raised 86% of target on average.

Pitchbook recently released its private market benchmark return analysis with final Q1 2022 data and preliminary Q2 data. Overall, private capital funds lost ground in Q2, declining 1.09%, after a positive Q1. Private equity (-3.16%), venture capital (-2.29%), and private debt funds (-1.80%) posted the lowest returns, while real estate (+3.61%), real assets (+2.16%), and secondaries (+4.65%) remained in positive territory. This year is clearly a reversal from the last two years, where growth and venture capital funds led, and the lower-risk income strategies lagged. Further downside risk in returns could be expected given the lag in valuations in the private markets. However, when considering that the S&P 500 lost nearly 16% in Q2, these markets appear to have done their job in diversifying risk and return streams.

For illustrative purposes only. Past performance is not indicative of future results.

 

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

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

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Products offered by iCapital Network are typically private placements that are sold only to qualified clients of iCapital Network through transactions that are exempt from registration under the Securities Act of 1933 pursuant to Rule 506(b) of Regulation D promulgated thereunder (“Private Placements”). An investment in any product issued pursuant to a Private Placement, such as the funds described, entails a high degree of risk and no assurance can be given that any alternative investment fund’s investment objectives will be achieved or that investors will receive a return of their capital. Further, such investments are not subject to the same levels of regulatory scrutiny as publicly listed investments, and as a result, investors may have access to significantly less information than they can access with respect to publicly listed investments. Prospective investors should also note that investments in the products described involve long lock-ups and do not provide investors with liquidity.

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