Maintaining open and transparent communication remains a priority for us at Berkeley Assets, and so it’s really important that we share with our clients what we have achieved, what challenges we’ve worked hard to overcome and our plans for the upcoming year.
This latest blog post reflects on the peaks and challenges of 2018 – the year that saw global news headlines dominated by the likes of Brexit, Trump and Blockchain. We take a look at how the private equity industry fared compared to 2017’s impressive deal flow figures, and we pinpoint our biggest wins and what that means for us all in 2019.
Talk us through the private equity industry in general for 2018
2018 was a phenomenal year for private equity, however, it wasn’t without two key challenges. The first being an uphill climb against 2017’s bumper year in deal flow, and second, the level of unspent capital (“dry powder”) seen in private equity funds as the buying frenzy continued across global PE markets.
A number of mega-deals were completed in Q4 that helped push deal value – the largest being the $21 billion acquisition of Dr Pepper Snapple Group by JAB Holdings and BDT Capital Partners. Overall, private equity firms continue to face increased competition for high quality assets, resulting in more aggressive and elaborate investment strategies to successfully deploy capital.
How much has the private equity industry raised this year?
Deal activity has remained resilient and robust throughout 2018. Q1 to Q3 2018 saw 3,501 deals worth $508.8 billion closed, representing an increase of 2.1% in the number of deals and 3.4% in the value of deals over the same period in 2017.
What has been the highlight of 2018 for Berkeley Assets?
Our focus at Berkeley Assets has been the same since day one: to deliver deal value to our institutional and retail clients and to ensure that capital is protected.
2018 saw an unprecedented amount of capital raised across all client sectors, far exceeding our capital raise targets which has allowed us to take on long-term hold projects that provide focused, stable returns.
One highlight for us has been the greater than expected growth that we have seen from our affordable housing projects in the UK, fuelled by demand for yield from institutional investors and the ongoing demand for housing created by the UK housing shortage.
The acquisition of our Blockchain technology investment business Cryptech World has allowed us to participate in a high growth industry with a small portion of our capital; there are some incredibly exciting prospects for 2019 with big headline projects in the pipeline.
What has been the biggest win in terms of business deals?
With capital raised, the next challenge is to select the best projects that fit our stringent investment ethos. Through meticulous and unrelenting due diligence we have taken on a unique blend of projects that provide stable yield in an era of equity market collapse, while maintaining capital protection across all business deals.
Our biggest win was our increased market share of the development finance and bridging loan sector within the UK. Our deal flow was up 60% from 2017 and we achieved higher returns from our loan portfolio by utilising our substantial capital reserves to participate in larger projects.
We also acquired a portfolio of commercial properties in 2018 at below market value, primarily located in the Greater London area. This acquisition will form the building blocks for a new hospitality venture that will showcase a dynamic business model aimed at millennial consumers. This is an essential move for us as the millennial generation become the world’s most powerful consumers; their spending power is huge and their ability to create and drive trends is more robust than we’ve ever witnessed before.
What can we expect to see from Berkeley Assets and the industry at large in 2019?
While we expect the trends observed in Q2 and Q3 2018 to continue into the first quarter of 2019, we also anticipate that private equity firms will turn their attention to more creative strategies, spreading risk by buying more minority investments, and thereby increasing the number of deals done.
This will serve as a way to diversify away from the current risks seen in the global economic climate.
We also anticipate significant buying opportunities in the wake of Brexit and have increased our capital reserves so that we are poised to take advantage of any short-term volatility in the UK, which could allow us to achieve very strong growth over the medium to long term.
At Berkeley we will remain true to our selection criteria of yield-based tangible business, however we acknowledge the need to be nimble in the headwinds that are expected to be seen across the private equity market in 2019.
Partners at Berkeley Assets