麥肯錫-五大阿爾法：在下一個私人資本時代取得成功的基本能力 Five alphas Essential capabilities to succeed in the next era of private capital 2024

May2024

Mcsey

company

PrivateCapitalPractice

Fivealphas:Essential

capabilitiestosucceedinthenexteraofprivatecapital

Thenexteraofprivatecapitalwilllookdifferentfromthelast.Fivecore

capabilitiescandeterminewhichmanagerscapturestrongreturns,growth,andprofitabilityinthesechangingtimes.

byAlyJeddy,JohnKelleher,andJu-HonKwekwithLouisDufau

Privatemarketsassetsundermanagement(AUM)haveexperiencedexplosivegrowthoverthepastdecade,increasing,ouranalysisshows,from

$3.8trillion1in2014to$13.1trillion2duringaperiodofhistoricallylowinterestratesandexpandingdealvolumes,andanincreasinglyglobalizedeconomy.

Macroeconomicconditionsoverthenextdecade

willbequitedifferent3Privatemarketshaveentereda

slowerera

ofgrowth,withnear-termfundraisingchallenges.Yetitisourviewthatprivatemarkets’

AUMcouldtriple(again)toover$30trillionby2034,

supportedbynewinvestmentneeds,newsourcesofcapital,andprivatecapital’s“governance

advantage,”4whichcontinuestocreatesuperior

returnsfortheindustryrelativetopublic

marketcomparables.

Firmsthatdon’t,ataminimum,tripleinsizeover

thenexttenyearscouldstructurallylosemarket

share,finditincreasinglydifficulttoremainrelevantforlargecapitalallocators,andfacechallenges

inattractingandretainingsomeofthebesttalententeringtheindustry.

Basedonourextensiveexperienceacrosstheprivatemarketsecosystem,servinggeneral

partners(GPs),institutionalinvestors,private-wealthintermediaries,andtraditionalasset

managers,webelievefirmsinthenextdecadewillneedtoleveragewhatwecallthe“fivealphas”

tooutperform.Excellingagainsttwoorthree

alphaswhilemeetinga(high)minimumacceptablestandardontherestcancreateapathtooutsize

growthandreturns.

Salesalpha

Salesalphaistheextenttowhichfirmsareable

toraisemorecapitalonbettertermsthantheir

“fairshare”(forexample,foragiventrackrecordofperformanceandsetofmarketconditions).

Thepowerofsalesalphaisclearinthecurrent

fundraisingdrought.From2021to2023,total

capitalraisedbyprivatemarketsfirmsdeclinedby17percentperannumtoalittleover$1trillion,

butthenumberoffundslauncheddeclinedby

39percentperannum5Lastyear,thetop25privatemarketsmanagersaccountedfor41percentof

overallfundraising,comparedwithaveragelevelsof29percentoverthepriordecade,6witheven

widergapsamongleadersandlaggardsinspecificassetclassessuchasinfrastructure.

Firmsthatareabletobuckcapitaldroughtsbuildcapital-raisingmachinesthatdothefollowing:

—expandtheirgeographicalreach(for

example,beyondUSpublicpensionfunds

tosovereign-wealthfundsintheMiddleEastandSoutheastAsia)

—useinsurancebalancesheetsasasourceofbothpermanentcapitalandmaterial

managementfees,particularlyforcreditandrealestatestrategies

—tapintothevastultra-high-net-worthfamilies

andretail-investorsmarket7(whichsomeprivateassetmanagersexpecttoaccountformorethan30percentoftheirfundraisinggoingforward8)

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BasedonPreqindata.

AsofJune30,2023.See“

McKinseyGlobalPrivateMarketsReview2024:Privatemarketsinaslowerera

,”March28,2024.

Reasonsincludehigherinterestrates(estimatedtosettle150to250basispointsabovelevelsexperiencedoverthe2010–20supercycle,peraMcKinseysurveyof200institutionalinvestorsconductedinJanuary2024);highergrowthinselectdevelopedcountries(forexample,the

UnitedStates);reengineeringofsupplychains,whichtriggeredstructuralrealignmentofmanufacturingcapacity;riseofanewmiddleclassinselectgrowthmarkets(forexample,MiddleEast,SouthEastAsia);andashifttowardalower-carboneconomy.

Thisgovernanceadvantageincludesbutisnotlimitedto:adynamicanddisciplinedcapitalallocationapproachtoselecttherightsectorsattherightprice,averydisciplinedapproachtooperationalexecutionandperformancemanagement(whichcanbeappliedoverlonger

horizons),andflexibilityinexittimingandliquiditypathways(whichcanleadtomaterialmultipleexpansion).

BasedonPreqindata,asoffirstquarter2024.

AnalysisbasedonPreqindataforfundswheresizedataisavailableasofquarterone2024.

USwealthmanagementclientassetsreached

$44.8trillion

in2022(withwealthintermediariessuchasprivatebanks,independentandregionalbroker–dealers,RIAs,andwirehouses).

“KKR&Co.,Inc.(KKR)CEOScottNuttallonQ32021results-earningscalltranscript,”SeekingAlpha,earningsconferencecall,November2,2021.

Fivealphas:Essentialcapabilitiestosucceedinthenexteraofprivatecapital2

—innovatewithnewproductvehiclestomeetnewinvestorneeds,suchasnontradedrealestate

investmenttrusts(REITs),businessdevelopmentcorporations(BDCs),andintervalfundsand

othersemiliquidstructures,whichreached

around$241billioninprivatemarketsAUMintheUnitedStatesalonein20229

—begintoaccesslargecorporateentitiesasanewsourceofstrategiccapital

Firmswithstrongsalesalphaarenotnecessarily

thetopquartilefundsineveryvintage;instead,theymayhavedevelopedstrongbrandsanddeliveron

theirperformanceobjectivesinwaysthatmeettheneedsoflimitedpartner(LP)portfolios.For

example,theymayconsistentlydeliver900basispointsofoutperformancerelativetopublic

marketsatscaleoverextendedperiods,ortheymay

providematerialupsideinfavorablemarket

conditions(forexample,30percent-plus)whilecappingthedownsidetoapension’shurdle

rate(forexample,8percent).

Thesefirmsoftendevelopproductsuitesanda

capitalstructuretheycanadapttomatchcapitaltotheopportunityset,aswellasclientcoverage

andengagementmodelsthatarebothsystematizedandsegmented.Theyalsoembracethemindset

thatraisingcapitalisascriticaltoafirm’ssuccessasinvestingcapital.Theyinvestintheirdistributionenginesaccordingly,withinvestmentteams

carvingout15to25percentoftheirtimefor

fundraising,andtheytakeastrategicapproachtopartnershipswithinstitutionallimitedpartners,

wealthintermediaries,andlargecompanies.

Sourcingalpha

Sourcingalphaistheabilitytomanufacturenewbespokeinvestmentexposures(thatis,specificreturn,risk,anddurationprofiles)ratherthan

relysolelyonintermediateddealflow.Toachieve

sourcingalpha,firmsneedahighdegreeof

creativitytocraftattractivetransactions,paired

withasophisticatedcapitalallocationprocess.Theyalsoneedabroadproductsuitetomeetdifferent

investorneeds.

Next-generationsourcingcreativity,forexample,wasobservedinanumberofrecentpartnershipsbetweenlargeinfrastructureplatformsand

establishedcompaniesacrossindustriessuchassemiconductors,fiber,powergeneration,and

lifesciences.AmongtheexamplesareBrookfield’s$15billioninvestmentinIntel’smanufacturing

expansion,10KKR’spurchaseof30percentof

Telenor’sfiberbusiness,11BlackRock’sGigapowerjointventurewithAT&T,12andBlackstone’s

financingdealwithModerna13

Suchopportunitiesstemfromemployingecosystem-levelapproachestosourcing,spanningmultiple

sectorsandthemes,aswellasinnovativecapital

structureangles(suchascommonequity,preferredequity,orproject-leveldebtfinancing).Inthisway,firmscancreatelargerdealsthatarederiskedanddivorcedfromthecyclicalityofagivensector.

Firmswillneedtoshifttheirapproachestosourcing

awayfromasector-specificviewandtoward

thefunctionalwaysthatopportunitiespresent

themselvesinthemarket(forexample,digitizationanddecarbonization).Firmscanintroducemore

fluidcollaborationacrossinvestmentteams.Theyshouldemploytalentwithdiverseskillsets—

includingindividualswithcorporate-developmentexperienceandapartnership/M&Amindset

andexperience—whocanworkwithtraditionaldealpartners.

Sourcingalphacanbegeneratedthrough

partnerships—betweenventurefirmsanduniversitylabs,forinstance,orbetweencreditmanagersand

originatorsofliabilities.Forgoodexamples,considerApolloGlobalManagement’s28partnerships

9USalternativeinvestments2023:Theexpandingreachofprivatecapital,CerulliAssociates,2023.

10“BrookfieldInfrastructuresignsdefinitiveagreementwithIntel,”Brookfieldpressrelease,August23,2022.

11“TelenorestablishesfibrecompanyinNorway,”Telenorpressrelease,October7,2022.

12“GigapowerjointventurefromAT&TandBlackRocklaunches,”AT&Tpressrelease,May11,2023.

13“BlackstoneLifeSciencesannouncescollaborationtosupportModerna’sInfluenzaprogram,”Blackstonepressrelease,March27,2024.

Fivealphas:Essentialcapabilitiestosucceedinthenexteraofprivatecapital3

leadingto$200billioninasset-backedoriginationasofNovember2023,14orCenterbridge’s

partnershipwithWellsFargo15tosecuredirect-

lendingopportunities.Thosecapableofproducing

sourcingalphacanpairthisopportunity-

manufacturingenginewitha“returntranching”

capabilitythatcarvesoutagiventransactionintodistinctexposuresthatcanbematchedtoeachinvestor’sparameters(return,duration,liquidity)andpackagedintoportfoliosmeetingspecific

investmentobjectives.

Operationalalpha

This

sourceofalpha

—alsodescribedas

postacquisitionvaluecreation—takesonnewimportanceinaneraofhigherinterestrates,inflation,anduncertainpublicmarketexits.

Considerthisexample:aprivateequitytransactionwithtypicalleveragemustachieveatwotofour

timesincreaseincashflowCAGRoverthecourseofitsholdingperiodifitistoabsorba400-basis-

pointsincreaseinthecostofdebt,withouterodingitsoriginalplannedreturn16Ifpublicmarket

uncertaintyaddsanotheryeartotheholdingperiod,

about10percentmoreinincrementalearningswillberequiredtoproducethatsamereturn.Theproblemiscompoundedwhenaddinginflation

andlongerinvestmenthorizons(createdbytheriseofpermanentcapitalvehicles,co-investorswithpatientcapital,long-datedfunds,and

continuationvehicles).

“Plainvanilla”operationalimprovements(suchas

G&Atrimmingandpricingenhancements)arenow

tablestakes.Achievingoutsizereturnsfrom

operationalalphawillrequirefirmstodeveloptheconvictiontounderwriteandthemuscletodeliver

trulytransformationalchange.Theycandothisby,amongotherinitiatives,creatingnewbusiness

models,divestingportfoliosatscale,reducingthe

dragonworkingcapital,buildingnewbusinesses

andlaunchingnewproducts,deliveringtechnologyimprovementsbeyondenterpriseresourceplanningsystemsandcloudtransformations,andsecuring

majorcapitalefficiencyimprovements.Partofthemuscleshouldcomedirectlyfromtheportfolio

companyCEO,whohasanoutsizeimpactonany

deal’sperformanceastheintegrativeexecutiveandthe“faceofthebusiness”toitsowners.

Forprivatemarketsfirms,distinctivenessinoperationalalpharequiresthefollowing:

—apreciseviewofeachasset’sfullpotential

acrossallstrategic,commercial,andoperationaltransformationlevers

—adisciplinedapproachtomaximizingthereturnonintervention—inourexperience,fewassetsaccountforadisproportionateshareofthe

potentialequityvaluegainedinagivenfund

—an“exitfirst”mindsetthatfactorsinthefuture

assetowner’sobjectivesinthepacingand

ambitionofvaluecreationinitiativesand

matchesthedeliveryofthatvaluetoanticipatedexitwindows

—atalentnetworktosourcenewandreplacementboardmembersandmanagementteams

—aprovenapproachtoupskillCEOsacross

operatingessentials(thatis,asetof

capabilitiesthatareproventomovetheneedleoncompanyperformance,suchasrapid

resourceallocation)andanecosystemofthird-partypartnerswhooptimizeexpertise,

reducethefixedcosttothefirm,andlinktheircompensationtotheachievementofspecificoutcomes

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“Platformoriginationdeepdive,”ApolloGlobalManagement,November2023.

“CenterbridgePartnersandWellsFargoenterstrategicrelationshipfocusedondirectlendingtomiddle-marketcompanies,”WellsFargopressrelease,September26,2023.

Dependingonunderwritingassumptions.Rangeretainedassumesabasecasewith5percentEBITDACAGR,3to4timesnetdebttoEBITDAatentry,six-yearholdingperiod,1.5timesminimumdebtcoverageratio,andconstantentryandexitmultiples.

Fivealphas:Essentialcapabilitiestosucceedinthenexteraofprivatecapital4

Exitalpha

Firmsproducingexitalphaareabletomonetize

assetssuccessfullyinarangeofwaysandmarket

conditions.AsoneCEOtoldus,“DPI17hasbecome

thenewIRR,somasteringexitsisnowboththealphaandomegainprivatemarketsinvesting.”

Exitalphamatters,especiallynow,whenrapidchangesinthemacroeconomicenvironmentarehavinganoutsizeimpactontheliquidityofprivatemarkets.

In2021,favorablemarketconditionsproppedupoverallglobalexitvolumestorecordhighs

(approximately$2trillion,comparedwith$1trillionin202018)andhelpedsomefirmsposttheir

highestfundrealizationsever.In2023,allthreetraditionalexitpathways—secondarybuyouts,

salestostrategics,andIPOs—floundered,andvolumescollapsed,bothinabsolutetermsto

$840billion,19aswellasonarelativebasis(falling

to1.4percentoftheoverallAUMversusa3.3percentaverageoverthepriordecade20).

Firmsthatdemonstrateexitalphadeveloparangeofexitroutes,suchas:

—GP-ledcontinuationvehicles(which,atvolumesof$48billion21in2023,areemergingasa

distinctsub-assetclass)

—long-holdinstitutionalstructures,potentiallywithlong-term,yield-orientedpayouts

—retail-orientedvehiclesthathavebeenusedasexitpathwaysincreditbutrequirefurther

evolutionbeforetheycanbeappliedtoprivateequityandinfrastructure

Thesefirmsalsoperformasystematicand

disciplinedre-underwritingofeachinvestmenteverysixto12months,basedonconsideration

oftheirgo-forwardreturns,outlookforcapitalmarketsentiment,portfolio-levelrisks,andtheoverallfunddeploymentandrealizationprofile.

Mostofall,GPsthatachieveexitalphaarealways

obsessingaboutwhothenextowneroftheirassetscouldbeandhowtogoaboutreturningcashto

thefundanditslimitedpartners.Thisfocuscouldbeamajorsourceofdifferentiationinthenext

era,giveninvestors’increasedpreferencefortruecashreturnsoverpapergains.

Organizationalalpha

Organizationalalphainvolvesdesigningthefirm’sstructureandoperatingmodelaroundthreeelements:

—client-centricity,withacapital-solutions

mindsetthatdesignsnewstrategiesand

productstomeettheneedsofLPportfoliosanddeliversnontraditionalstructures(forexample,

separateaccounts,co-investments)thatsupportLPinvestmentobjectives

—repeatability,withjustenoughprocessto

compensateforthelossofproximityina

growingfirm,maintainaconsistentlyhighbarforinvestmentperformance,andeliminate

damagingoutcomes

—scalability,withamodulararchitectureto

acquireandintegratenewassetsand

newtalent,investmentsindataandtechnologytostrengthenthefirm’sspine,andstrong

governanceandsuccessionplanningatalllevels(notjustatthetop)topreserveentrepreneurialisminabiggerfirm

Successfulfirmshaveengineeredandindustrializedtheirflagshipprocessesendtoend(investmentandportfoliocommittees,clientengagement,partner

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