Private Equity

Market disruption was most pronounced from March to June, when most managers focused on portfolio preservation and deal activity slowed. This period of dislocation was relatively brief as massive government stimulus packages quickly improved economic prospects and investor sentiment. Private equity investors also adapted to new ways of working, with connectivity technologies allowing managers to conduct diligence remotely. Supported by the availability of inexpensive financing, both the pace of investment activity and valuations returned to pre-pandemic levels in the second half of 2020.

ADIA’s Private Equities Department (PED) was active throughout the year and deployed more capital in total than ever before. Direct investments and co-investments represented 55% of overall deployment for 2020, up from 45% in 2019, with the balance committed to funds. In total, PED completed 24 direct investments in 2020, up from 18 in the previous year, in addition to investments in early-stage companies alongside our venture capital partners.

Investment activity was well distributed across geographies during 2020. The Department’s focus on Asia-Pacific was evident with the successful completion of direct investments in China and, in particular, in India where the team was able to grow its portfolio of investments significantly for the third consecutive year.

In 2021, PED expects competition for attractive companies to remain intense or even accelerate. Globally, the private equity landscape is awash with liquidity as dry powder, or funds available for investment, has reached new records. Financing continues to be supportive, with central bank rates expected to remain at or near zero for the foreseeable future. Additionally, competition for assets from non-traditional sources, including continuation funds and special purpose acquisition companies, is likely to increase.

Against this competitive backdrop, PED will maintain its disciplined approach, leveraging its industry practices and core partners to pursue the most compelling opportunities on a global relative value basis.

We continue to believe in the long-term prospects of the technology sector, with mega-trends accelerating in the wake of Covid-19. Despite the rise in valuations, enterprise software remains attractive, given the significant market demand, high degree of recurring revenue and long-term growth drivers. We are also focused on selected areas in IT services, Internet and broader tech-enabled opportunities that align with PED’s other industry practices.

PED continues to seek opportunities in healthcare, which is backed by robust underlying demographics and a range of positive technological and structural shifts, in some cases accelerated by Covid-19. Areas of focus include the broader pharmaceutical space, life science tools and diagnostics, specialised care providers, and healthcare IT.

The digital transformation of financial services is likely to remain a key theme in 2021, along with tech-enabled disruption and payments. PED’s current portfolio is well-exposed to capital intensive businesses in the sector, which are expected to benefit during the post-Covid recovery.

In the consumer sector, we will continue to focus on defensible market leaders that benefit from sustainable trends in their respective categories and with opportunities to leverage technology to drive profitable growth.

In industrials, the Department will work closely with its partners to support businesses looking to retool for the digital age as automation, digitization and sustainability remain key themes impacting the industrial world.

PED’s venture capital focus remains on accessing investments linked to innovation in technology and healthcare at the earliest stages of development, with select follow-on investments as companies confirm their breakout potential.

In private credit, the Department’s significant sectoral knowledge, flexible and long-term capital, and reputation as a trusted partner provide differentiation as PED seeks to provide structured solutions where appropriate.

On a regional basis, PED expects to remain active globally in 2021. We continue to view Asia-Pacific as a key focus area, backed by strong demographic trends, consumers’ rising spending power, increased demand for healthcare and education, and technology-led business transformations.