Private Placement Industry Insights as of January 31, 2024

Tuesday, February 13th, 2024 and is filed under Industry Reporting

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

• Twenty new private placements were added to investment product training in January, up from 15 last month and roughly 33% more on a year-over-year basis. After a slow year in 2023, where lower fund formation led to fewer funds added to investment product training, it is good to see this uptick kick off in 2024. All the categories except Opportunity Zones are flat to up in terms of new funds being added. The niche sectors are still seeing the strongest growth, although activity in 1031 exchanges and non-tax-focused real estate funds picked up modestly in January after weakness last year. While there were more new funds added, the real estate funds were smaller and seeking to raise less capital than those added at this time last year. This brought down the overall total, with funds added in January targeting 39% less capital on a year-over-year basis.
• As of February 1, AI Insight by iCapital covers 270 private placements currently raising capital, with an aggregate target raise of $50.5 billion and an aggregate reported raise of $34.3 billion or 68% of target.
• The average size of funds currently raising capital is $188 million. Funds range in size from $3.8 million for a real estate property improvement fund to a recently increased $14.4 billion AUM diversified private equity and debt fund.
• Real estate-related funds, including 1031s, Opportunity Zone funds, and non-1031 real estate LLCs, LPs, and private REITs represent 73% of the total number of funds and 49% of the aggregate target. The percentage of target is down significantly as larger private equity and hedge funds have been added along with the slowdown in real estate. Additionally, private equity’s share of the target raise is likely much higher because, despite the closing of the large private equity fund, there are 12 funds that do not report a target or capital raise, as they are seeking instead to raise a percentage of a larger, institutional fund rather than a specific dollar amount.
• In terms of coverage by general objective, income has been and remains the largest component at 55% of funds, while growth and growth and income follow at 23% and 20%, respectively.
• 61% of private placements we cover use the 506(b) exemption, 32% use 506(c) and 7% have not yet filed their Form D with the SEC.
• Nineteen private placements closed to new investors in January, having been on the platform for an average of 379 days. The fourteen funds that reported a raise at close raised 81% of target, on average.
• Pitchbook recently released its Private Capital Benchmarks performance update, with preliminary data for Q3 2023 and final data for Q2. Over the 1-year period ending September 30th, real assets excluding real estate posted the strongest returns at 9.38%, followed by private debt (+6.94%) and private equity (+6.56%). Venture capital was the worst performing category, down 7.96%, while real estate was down 1.23%. Q3 saw a little less diversion in performance among the categories, with the top performing category – real estate – up 2.34% while venture capital declined 0.66%. Even with the last couple of years of challenging data for venture and other more growth-focused private markets, over the 15-year time horizon growth/expansion equity still tops the chart along with buyouts and venture capital, all posting double-digit returns, while private debt and real estate settle in at the bottom of the pack, posting their historical income-plus returns in the upper single-digit range.

Source: AI Insight by iCapital, as of January 31, 2024. Based on programs activated on the AI Insight platform as of this date.

For illustrative purposes only. Past performance is not indicative of future results. Future results are not guaranteed and loss of principal may occur.

 

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Source: AI Insight by iCapital, as of January 31, 2024. 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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