PE Funds

The majority of PE investments are made through closed-end PE Funds managed by professional PE managers. PE Funds acquire equity positions in private companies. In certain instances, publicly traded companies may be acquired and privatised arising from a PE transaction.


PE Limited Partnership Structure

A fund manager typically raises capital for a PE Fund from investors using a limited partnership structure. The fund manager performs the role of general partner ("GP") and makes key investment and management decisions. Investors are known as limited partners ("LP") and have a limited influence on the Fund's investment decisions.

Astrea III Limited Partnership Structure

The year in which a fund commences its operations or begins to draw capital from its investors is typically referred to as its "vintage" year. Under this structure, the GP directs capital into Investee Companies as investments and usually acquires a majority ownership position in order to provide meaningful control of the company's board, governance, and operations.


PE Fund Strategies

Generally, PE Funds aim to improve the financial performance of investee companies and help realise their growth potential. They do so by investing in such companies and making operational improvements. Each investment is usually between 4-6 years, after which the fund managers will seek to realise profits on these investments either through a sale or an initial public offering ("IPO").

PE Funds are categorised by the investment strategies they employ, each with varying risk, return, and liquidity profiles. Key investment strategies employed by PE funds are:

Buyout

Purchase of controlling stakes in an investee company often resulting in the control over the investee company's assets and operations and involving acquisition leverage

Growth Equity

Investments in profitable but still maturing companies which are seeking capital to expand or enter into new markets

Venture Capital

Investments in start-up or less mature companies which are expanding

Private Debt

Investments in an array of illiquid credit instruments


Diversified Investments by PE Funds

Individual PE Funds attempt to achieve a certain level of portfolio diversification, and each PE Fund's Limited Partnership Agreement ("LPA") generally contains provisions limiting the concentration of any single portfolio investment within its regional and sector remit. The result is typically a portfolio of ten or more investee companies, made over a multi-year period.


PE Industry Trends

Significant Growth in AUM

The PE industry has enjoyed significant growth over the last 15 years. The industry's assets under management ("AUM") was valued at US$2,500 bn (Fig. 1) as of June 2015, representing an annualised growth rate of 12% since December 1999. AUM includes the industry's available capital for investment, or "dry powder", and unrealised value of PE investments. 

Fig. 1: Evolution of PE AUM
Evolution of PE AUM to 2015

PE Funds AUM

Data as of June 2015 shows that US-focused PE Funds represent the majority of global PE AUM, followed by Europe, Asia, and the remaining Rest of World ("RoW") (Fig. 2). In terms of strategy, Buyout represents the majority of global PE AUM (Fig. 3).  

Fig. 2: PE AUM by Region
Private Equity AUM by Fund Region

Fig. 3: PE AUM by Strategy
Private Equity AUM by Fund Strategy

Strong Fundraising Environment

While the market has yet to experience fundraising levels seen in the lead up to the global financial crisis, which peaked in 2008 at US$386 bn, it has experienced a steady climb with approximately US$300 bn per year since 2013. This represents a 78% higher run rate than 2010's post-GFC low of US$168 bn (Fig. 4). A reason for this trend is the redeployment of capital inflows from net cash distributions into new fund commitments.

Fig. 4: PE Fundraising
Private Equity Fundraising Trends

Increase in PE Deal Activity

In an environment of heightened global liquidity and low interest rates, recent PE asset valuations and their acquisition multiples have continued to rise providing an attractive window for PE managers to exit and monetise their mature investments. Per Fig. 5, 2014 was a record year for Buyout exits, with 1,850 global investment exits valued at US$470 bn, representing a 40% increase in exit value from 2013. 2015 was another strong year, with 1,757 global investment exits valued at US$424 bn. 

Fig. 5: Company Exits from Buyout Funds
Company Exits from Private Equity Buyout Funds

The information regarding private equity and the private equity industry has been derived from general information which is publicly available as well as the specific sources cited in the endnotes to this section or were obtained from various external sources, and have not been verified with such sources. The information is included for information purposes only and has not been independently verified by the Issuer and its affiliates and should not be regarded as an indication of the future performance or results of the Fund Investments, or private equity funds or the private equity industry generally. 

The information contained in this section includes historical information about private equity funds and information on the private equity industry generally that should not be regarded as an indication, promise or representation as to the past or future performance or results of private equity funds or the private equity industry generally.