Seeing is believing

News, WEEKLY SPIN

While tech giants focus their AI strategy on content generation, AI-generated visual media is on the rise, with a 90% VC funding increase. It seems fitting that we generated our own AI image to accompany this latest edition of the Weekly Spin, given that investment in AI visual media is on the rise. According to the latest PitchBook data, Q1 2024 saw a nearly 90% increase in deal value, climbing to $402.7 million from the previous quarter’s total of $212.7 million. Technology start-ups are focusing their AI visual solutions on enterprise businesses with the likes of Photoroom, an AI photo editor aimed at ecommerce businesses, raising $43 million. Balderton Capital and Y Combinator were investors in the Series B round. AI visual content is fast becoming an important sub-sector of the generative AI space. Early-stage GPs with the vision to pick out the next best start-ups could benefit, as more investment dollars flow in. It feels like the AI content revolution is only just beginning.

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Private Debt: No stopping the Megatrend

INDUSTRY INSIGHTS, News

Private debt has proven itself in recent years to be a highly resilient, valuable asset class for LPs’ investment portfolios and there are no signs that the party will be coming to an end anytime soon. Overall industry AUM has grown to $1.5 trillion and is forecast to reach $2 trillion by 2027. This is now a mainstream alternative asset class; one that continues to grow and mature as a bona fide megatrend. Indeed, with the opportunity to earn double-digit returns on first-lien debt, industry leaders including Stephen A. Schwarzman believe this is a golden age for the asset class. There are various factors driving this megatrend. Some of these include, at a very high level:

• Diversification
• Yield enhancement
• Illiquidity premium
• Macro tailwinds
• Income generation

Private debt has evolved to become a highly diverse asset class. Since 2007, the market has grown from $280 billion in assets under management to $1.5 trillion in 2022. While direct lending to corporates, real estate, and infrastructure has been well established for some years, specialty finance has also been growing in areas such as aviation finance, litigation finance, NAV lending, IP & royalties, and venture debt. Indeed, KKR estimates that asset-backed finance is a $5 trillion market and growing.

Billionaire Boys (Buyout) Club

News, WEEKLY SPIN

PE firms are tapping in to billionaire family wealth to help get buyout deals over the line, in a sign that family offices are becoming even more important co-investors. Bloomberg data reveals that wealthy families have contributed to nearly $20 billion of listed company takeovers. Family fortunes are proving to be quite the hit show, with blue chip PE groups not immune from the chilling effects of a slower fundraising environment. Family dollars have proved invaluable in getting a number of prominent acquisitions over the line this year, including Germany’s Veissmann family co-investing alongside KKR in the $3 billion purchase of renewable energy firm Encavis AG. These family friendly deals show that buyout fundraising has shifted slightly and become the ‘Billionaire Boys (Buyout) Club’.

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3D View: The 3 Megatrends Shaping Infrastructure

INDUSTRY INSIGHTS, News

These trends – which, in turn, open up thematic discussions around energy transition, and data/digital infrastructure developments (i.e. fiber optics, 5G towers, data centers) – have been an important feature at IPEM’s last two events: IPEM Paris (September 2023), and IPEM Cannes (January 2024). IPEM’s Infrastructure Summits bring industry experts together – both GPs and LPs – to present industry data and discuss the latest asset class developments. As such, they give delegates a great opportunity to delve deep into the details and ensure the right questions get addressed. Over the last two years, an array of leading organizations have taken the stage, including:

● Arclight Capital Partners
● Aon
● AXA IM Prime
● Eiffel Investment Group
● Vauban Infrastructure Partners

One of the key takeaways from the last two summits is that the ‘3D’ megatrends will open up the need for continued private investment over the coming decades. Funding gaps in the middle market, in particular, are likely to provide plenty of deals for investors to pursue, and drive operational improvement.

With inflation rising alongside interest rates, infrastructure has continued to expand in recent years. European core infrastructure investment has grown from approximately EUR26 billion in 2009 to EUR150 billion today. There is an optimistic feeling among institutional allocators on how infrastructure allocations will progress over the next few years given how resilient the asset class has proven to be across economic cycles. Not to mention its strong de-correlation to equities, and its ability to offer an effective long-term hedge against inflation.

This has supported strong fundraising (though 2023 was an exception), with overall dry powder growing from $275 billion in 2020 to $339 billion through January 2024.

Meme - Goldman’s $20bn+ fundraise…quite the work of art

Golden Opportunity

News, WEEKLY SPIN

That old expression ‘Streets paved with gold’ is well known to many but Goldman Sachs Asset Management has put a new spin on it. Why? Their latest direct lending fund – West Street Loan Partners V – has raised more than USD20 billion to support PE-backed global businesses. That’s a significant number and rather than suggesting private credit is overheating, this latest fundraise would seem to suggest the road ahead looks positively golden. Of course, it helps if you’re one of the early pioneers in this space which Goldman are, having launched their first direct lending strategy in 2008. No doubt the private credit team at GSAM will be ‘high fiving’ with this fifth iteration. Apparently, some USD4 billion has already been invested across 37 portfolio companies. Private credit is in sparkling form at the moment, as the USD1.6 trillion AUM market looks set to further grow. Maybe all that glitters really is gold!

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