PENGANA PRIVATE EQUITY TRUST ersonal use only
PENGANA PRIVATE EQUITY
TRUST (ASX: PE1)
CONFIDENTIAL - NOT FOR REDISTRIBUTION
MARKET IMPLICATIONS &
OPPORTUNITIES
Independent Investment Research
Recommended+
The Notes and Disclosures following this presentation are an integral part of this presentation and must be read in connection with your review of this presentation.
GCM Grosvenor®, Grosvenor®, Grosvenor Capital Management®, GCM Customized Fund Investment Group® and Customized Fund Investment Group® are trademarks of Grosvenor Capital Management, L.P. and its affiliated entities. This presentation has been prepared by Grosvenor Capital Management, L.P. and GCM Customized Fund Investment Group, L.P.
©2022 Grosvenor Capital Management, L.P. and GCM Customized Fund Investment Group, L.P. All rights reserved.
JULY 2022
1H 2022 - HOW BAD WAS IT? WORSE THAN 2008.
Unexpectedly high inflation and rapidly rising interest rates caused widespread asset repricing, driving a bear market in equities and substantial mark to market losses across interest rate sensitive assets. This is the worst start to a year for balanced portfolios in over two decades.
1H '22 Worse than 1H '08 For Equities | |
S&P 500 YTD Returns by Calendar Year, | |
2000-2022 | |
only | 40% |
use | 20% |
0% | |
-20% | |
-40% | |
-60% | |
Sourc : Bloomberg | |
ersonal |
Drawdown in Bonds is Unprecedented
Bloomberg Aggregate Bond Index YTD Return by Calendar Year, 2000-2022
40%
20%
0%
-20%
-40%
Average
2008
2022
-60%
60/40 Portfolio has been Hammered
YTD Returns for the Vanguard Balanced Index Fund, 2000-2022
40%
20%
0%
-20%
-40%
-60%
PENGANA PRIVATE EQUITY TRUST (ASX: PE1) | PAGE 2
1H 2022 MARKET DETAIL
The first half of 2022 has seen material declines across most risk assets amid high inflation, rising interest rates alongside growing geopolitical and economic uncertainty.
onlyuse ersonalSourc :
Equity Sector Returns | Regional Equity Returns | |||||||||||||
Emerging Markets | -18% | |||||||||||||
Energy | 32% | |||||||||||||
Industrials | -17% | Europe | -13% | |||||||||||
Health Care | -8% | Asia | -17% | |||||||||||
Materials | -18% | China | -11% | |||||||||||
Financials | -19% | U.S. (S&P 500) | -20% | |||||||||||
Consumer | -6% | |||||||||||||
Factor Returns | ||||||||||||||
Staples | ||||||||||||||
Utilities | -1% | |||||||||||||
Biotech (XBI) | -34% | Value | -13% | |||||||||||
Consumer | -33% | Quality | -23% | |||||||||||
Discretionary | ||||||||||||||
Information | -27% | Growth | -28% | |||||||||||
Technology | ||||||||||||||
Real Estate | -20% | Momentum | -25% | |||||||||||
Communications | -30% | |||||||||||||
Bloomberg
Credit Returns
High Yield | -14% | |||
Emerging Markets | -17% | |||
Distressed Credit | -24% | |||
Investment Grade | -10% | |||
351 | ||||
321 | ||||
279 | ||||
222 | ||||
189 | ||||
150 | 152 | |||
128 | ||||
78 | ||||
50 | ||||
2Yr | 10Yr | 30Yr | HY | IG |
2.95% | 3.01% | 3.18% | 5.91% | 2.36% |
Current Yields | Spreads | |||
6/30/2022 | 6/30/2022 |
YTD Change in Yield / Spread
Change in Yield / Spread from 52Wk Low
PENGANA PRIVATE EQUITY TRUST (ASX: PE1) | PAGE 3
FROTHY VALUATIONS HAVE RETURNED TO EARTH
While public market valuations have come down from lofty heights, growth businesses have seen a much sharper decline given where they peaked.1
onlyuse | Russell 2000 Growth Periodic EV to | ||||||||
S&P 500 Periodic EV to Trailing 12M EBITDA | |||||||||
ersonal | Trailing 12M EBITDA | ||||||||
Private market valuations are also starting to retreat; however, given that average entry multiples for U.S. buyout deals are typically lower | |||||||||
than where multiples have ranged in the public markets, particularly in the middle market where they have averaged ~10x-10.5x2,3 over the | |||||||||
last 5 years, we believe there will likely be less multiple contraction. | |||||||||
1. Source: Bloomberg. | |||||||||
2 Purchase price excludes fees & expenses. | PENGANA PRIVATE EQUITY TRUST (ASX: PE1) | PAGE 4 | ||||||||
3 Source: S&P 'GCM Custom LBO Data.' Middle Market: Less than 1500mm Transaction Size. Data as of March 31, 2021. |
PRIVATE EQUITY HAS NOT BEEN IMPACTED AS GREATLY
While the impact on PE returns has been fairly muted, given the significant public market declines in 1H 2022, we expect the value of unrealized PE investments to be impacted in the coming quarters, particularly if the downturn is a prolonged one.
onlyuse
ersonal•
•
•
Burgiss North America Buyout Index | Burgiss North America Growth Capital Index | ||||
The current dislocation has been most heavily focused on growth businesses whereas our PE portfolios are underexposed to growth and venture and have a bias toward cyclical and industrial businesses like other traditional PE strategies
We believe that investors that partnered with cycle-tested managers and have an appropriate level of diversification should be better positioned to weather the current market environment
Historically, private equity returns following market corrections are quite strong, as private equity firms with capital to deploy are able to buy distressed and/or undervalued assets at attractive prices
Source: Burgiss, July 2022. | PENGANA PRIVATE EQUITY TRUST (ASX: PE1) | PAGE 5 |
No assurance can be given that any investment will achieve its objectives or avoid losses. Past performance is not necessarily indicative of future results. |
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Pengana Private Equity Trust published this content on 27 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 July 2022 00:07:50 UTC.
