PEI Q Fundraising ReporT

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1 PEI Q Fundraising ReporT

2 At record pace Q FUNDRAISING REPORT NOVEMBER 2017 Report Editor Sophie Colby Senior Research Analyst, London Private Equity International Tel: Special Projects Editor Graeme Kerr Tel: Production and Design Manager Miriam Vysna Tel: Research & Analytics Dan Gunner Director, Research and Analytics Private Equity International Tel: Daniel Humphrey Rodriguez Research Manager, London Private Equity International Tel: Craig Savitzky Research Manager, New York Private Equity International Tel: Ext 134 Contributors Andrew Garrod Karina Zinkiewicz SOPHIE COLBY EDITOR'S LETTER Private equity s inexorable rise continued into the third quarter of 2017 as capital raised by funds holding a final close hit $386.1 billion, building upon the success of the largest H1 fundraising period since Given the success of the first three quarters of the year, it is likely that 2017 will be the biggest fundraising year post-crisis. Notable funds closed in Q3 include the $9.4 billion Bain Capital Fund XII, which surpassed its $7 billion target to hold a final close after just five months on the road. New Mountain Partners V also closed significantly above its target of $5 billion to hold a final close at $6.15 billion, and AG Direct Lending Fund II closed at $2.3 billion having initially targeted $1 billion. Increasing average fund sizes indicate that capital is falling into the hands of fewer and more established managers. Fund managers such as Bain Capital, CVC Capital Partners, KKR and Apollo Global Management are among the big names that have closed funds in 2017 to date, and on average, private equity vehicles have increased in size by $142.5 million since last year. Despite 2017 being on track to become a peak fundraising year, the larger and faster capital raising environment remains a concern for LPs. A lack of discipline among fund managers, too much dry powder and whether we have reached the apex of the fundraising cycle are currently some of the biggest concerns among investors. The number of funds currently on the road has increased from 2,265 at 1 October 2016 to 2,604 at 1 October 2017, suggesting that GPs are still actively chasing capital. Although total capital targeted by funds in market has decreased significantly over the same period, many blue-chip managers remain firmly in the game. Among these are EQT and BC Capital Partners, targeting 15 billion collectively for their latest private equity offerings. Enjoy the report, Sophie Colby e: sophie.c@peimedia.com NEW YORK 16 West 46th Street, 4th Floor New York NY Fax: LONDON 140 London Wall London EC2Y 5DN Fax: HONG KONG 19F On Hing Building 1 On Hing Terrace Central, Hong Kong Fax: The data used in this review is collated and compiled by Private Equity International in London, New York and Hong Kong, using the data included in your Private Equity International Platinum subscription. For more information, please contact your account manager: Jack Wharton in London on +44 (0) or jack.w@peimedia.com Sigi Fung in Hong Kong on or sigi.f@peimedia.com Andre Anderson in New York on or andre.a@peimedia.com PEI 2017 No statement in this report is to be construed as a recommendation to buy or sell securities. Neither this publication nor any part of it may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage or retrieval system, without the prior permission of the publisher. Whilst every effort has been made to ensure its accuracy, the publisher and contributors accept no responsibility for the accuracy of the content in this report. Readers should also be aware that external contributors may represent firms that may have an interest in companies and/or their securities mentioned in their contributions herein. 2 PEI Q Fundraising Report

3 Q3 fundraising FUND CLOSES Still on track Private equity funds raised more than $83bn in the third quarter, up from $75bn in the same period last year Capital is continuing to fall into fewer hands, with third-quarter fundraising totals outstripping last year s in value across fewer funds. Data from Private Equity International shows that 129 funds held a final close in the three months to 30 September raising $83.3 billion between them, compared with 142 funds raising a combined $74.6 billion in the same period last year. The largest fund that closed during the period was Bain Capital s 12th buyout fund, which closed at $9.4 billion in September, above its initial $7 billion target. The final amount included a GP commitment of $1.4 billion, around 15 percent of the fund. Investors in that vehicle include Pennsylvania Public School Employees Retirement System, Tennessee Consolidated Retirement If we don t believe the skill-set of the manager is applicable to larger deals, we typically won t invest with the manager Brady Hyde System and Virginia Retirement System, according to PEI data. So far this year private equity funds have collected $386 billion, putting the year on track to beat 2016 s fundraising total of $446 billion. Since 2014 the average fund size has been steadily increasing, hitting $715 million in the first half of this year. For some limited partners, this is cause for concern. The thing in today s environment that we re concerned about is that since managers are increasing their fund sizes and increasing their fund sizes very quickly, it forces them up-market, Brady Hyde, the former portfolio manager for private equity investments at UPS told PEI in an exclusive interview in August. If we don t believe the skill-set of the manager is applicable to larger deals, we typically won t invest with the manager. n * We ve made minor alterations to our data this quarter, reclassifying some funds as private equity rather than infrastructure funds. The historical data has been updated to reflect this change. POST-CRISIS HIGH In the first three quarters of 2017, $386.1 billion was raised from the close of 524 funds, amounting to 87 percent of the total capital raised in The 129 funds that closed in Q3 raised $83.3 billion between them, up from 142 funds raising a combined $74.6 billion in the same period last year. Fundraising for the full year looks set to exceed total capital raised in any post-crisis year; among the biggest funds gearing up for a final close in Q4 are BC European Capital X, which has already raised 6.7 billion towards its 7 billion target, and EQT VIII, which launched in September with an 8 billion target. Private equity fundraising, 2010-Q $bn 762 Capital raised Q1-Q Number of funds closed PEI Q Fundraising Report No 3

4 Q3 FUNDRAISING Ten largest funds closed in Q3 Partners Group Direct Equity 2016 Bain Capital Fund XII Partners Group Bain Capital $3.52bn $9.40bn 129 Private equity funds closed in Q3 $83.31bn Total capital raised in Q3 Oak Hill Capital Partners IV Oak Hill Capital Partners $2.65bn $9.4bn Bain Capital Fund XII was the largest fund to close in Q3 New Mountain Partners V New Mountain Capital $6.15bn Waterland Private Equity Fund VII Waterland Private Equity Investments $2.35bn Lexington Middle Market Investors IV Lexington Partners $2.66bn AG Direct Lending Fund II Twin Brook Capital Partners $2.30bn Senior Loan Fund I BlueBay Asset Management $3.52bn Asia Alternatives Capital Partners V Asia Alternatives Management $1.80bn Castlelake V Castlelake $2.40bn Buyout/Corporate Private Equity Mezzanine/Debt Fund of funds Secondaries 4 PEI Q Fundraising Report

5 Q3 FUNDRAISING RACING AHEAD Q1-Q has seen the largest increase in average fund size post-crisis, with vehicles $142.5 million larger on average than in Established managers with solid track records are raising larger funds, continuing the trend from Q2 when the $9.3 billion KKR Asian Fund III and the 16 billion CVC Capital Partners VII closed the largest-ever Asia-focused and Europe-focused funds. Twenty of the 129 funds closed in Q3 raised more than $1 billion, which is almost twice the number that closed at over $1 billion in Q Average fund size ($m), 2010-Q Q1-Q ALL EYES ON EUROPE Regional breakdown of capital raised in Q3 Despite Europe-focused funds raising $4.2 billion less in Q than in Q3 2016, Europe-focused fundraising this year has so far exceeded capital raised during Q1-Q thanks to the close of the largest-ever Europe-focused fund in Q2 the 16 billion CVC Capital Partners VII. Of the aggregate capital raised in the quarter, 18 percent had a multi-regional focus (compared with 16 percent in Q3 2016), suggesting that the majority of investors are still looking for GPs with a clear focus on a single core market. No vehicles focused on Sub-Saharan Africa closed in the quarter. North America $45.48bn Latin America $0.32bn Multi-Regional $14.99bn MENA $0.37bn $86.83bn Capital raised Europe $14.48bn Asia-Pacific $7.67bn SECONDARIES SWITCH Buyout funds accounted for almost twothirds of capital raised by all funds closed in the quarter. Private equity secondaries funds raised $3.32 billion this quarter, compared with $2.4 billion at the same point in The close of Lexington Middle Market Investors IV bolstered secondaries investments; at $2.7 billion, the fund accounted for 80 percent of the capital raised. Strategy breakdown of funds closed in Q3 $38.75bn Buyout/ Corporate Private Equity $23.65bn Mezzanine/ Debt $6.97bn Growth Equity $4.34bn Venture Capital Secondaries Co-Investment PEI Q Fundraising Report $3.32bn $3.28bn $2.37bn Fund of Funds $0.64bn Distressed/ Turnaround 5

6 Q3 FUNDRAISING FUNDS IN MARKET Demanding less The number of funds in market is up but the amount of capital targeted is down by more than $100bn from a year earlier CAPITAL SLUMP Total capital targeted by funds in market as at 1 October 2017 was $652.5 billion, which was $100 billion less than the total amount targeted at the same point in The number of funds in market has increased from 2,265 to 2,604 since the end of Q Vista Equity Partners VI is now the largest fund in market targeting $10.5 billion for buyout investments in North America the vehicle has already raised $10.6 billion but a final close is yet to be confirmed. Private equity funds in market snapshot ($bn) Oct Oct Oct 17 Strategy breakdown of funds in market, as at 1 October 2017 Buyout/Corporate Private Equity Mezzanine/Debt Growth Equity Venture Capital Fund of Funds Distressed/ Turnaround Secondaries Co-Investment $30.89bn $23.04bn $21.33bn $13.30bn $98.30bn $81.33bn $161.59bn $222.72bn AMERICA RULES North America remains the region of choice for a large proportion of funds in market, now targeting 40 percent of all capital compared with 35 percent at the end of Q Asia-Pacific also remains popular among investors, counting the biggest-ever Asia fund, KKR Asian Fund III (closed in June 2017 at $9.3 billion), among recent fund closes. Regional breakdown of funds in market, as at 1 October 2017 Sub-Saharan Africa $6.43bn North America $264.2bn Latin America $6.23bn Multi-Regional $169.75bn Asia-Pacific $104.73bn Europe $96.51bn MENA $4.64bn Ten largest funds in market, as at 1 October 2017 FUND NAME FUND MANAGER TARGET SIZE ($BN) LAUNCH DATE FUND STRATEGY REGIONAL FOCUS Vista Equity Partners VI Vista Equity Partners Feb 16 Buyout/Corporate Private Equity North America 3G Special Situations Fund V 3G Capital Nov 16 Distressed/Turnaround North America EQT VIII EQT 8.82 Sep 17 Buyout/Corporate Private Equity Europe Riverstone Global Energy & Power Fund VI Riverstone Holdings 8.00 Apr 14 Buyout/Corporate Private Equity Multi-Regional BC European Capital X BC Partners 7.72 Jan 16 Buyout/Corporate Private Equity Multi-Regional GSO Capital Solutions Fund III Blackstone 6.50 Jun 17 Mezzanine/Debt Multi-Regional Onex Partners V Onex 6.50 Apr 17 Buyout/Corporate Private Equity North America Abraaj Private Equity Fund VI The Abraaj Group 6.00 Jun 17 Buyout/Corporate Private Equity Multi-Regional Insight Venture Partners X Insight Venture Partners 5.50 Apr 17 Growth Equity Multi-Regional NGP Natural Resources XII NGP Energy Capital Management 5.33 Mar 17 Growth Equity North America 6 PEI Q Fundraising Report

7 LP Insights People moves The Teacher Retirement System of Texas (Texas TRS) has made the following appointments for its investment management division: Jerry Albright has been named chief investment officer and Jase Auby is deputy chief investment officer; Katy Hoffman is appointed to the TRS Internal Investment Committee; Sylvia Bell is promoted to chief operating officer; Eric Lang will serve as director for external private markets; and James Nield is named chief risk officer. 1 Oregon State Treasury plans to hire three new investment officers to focus on alternative investment strategies, as part of a new staffing strategy. 2 Kang Myoun-Wook, the chief investment officer of the National Pension Service of Korea, has announced his resignation. 3 Daniel Garant, chief investment officer of the Public Sector Pension Investment Board (PSP Investments) resigned, as of 30 June Canada Pension Plan Investment Board has announced multiple senior executive appointments: Neil Beaumont became senior managing director and chief financial and risk officer as of 24 July 2017; Geoffrey Rubin assumed the position of senior managing director and chief investment strategist and Ed Cass replaced Graeme Eadie as senior managing director and global head of real assets, as of 15 July All news taken from PEI Q Fundraising Report 7

8 LP Radar LP radar Nippon Life Insurance plans to commit to 20 private equity funds in the next 12 months, with commitment sizes between $40 million and $70 million. Christian Super, the Australian superannuation fund, expects to make a A$10 million ($7.8 million; 6.6 million) to A$20 million investment in energy in late 2017 and early Japan Post Bank wants to pay more attention to co-investment or club deals. It plans to allocate over 70 percent of its private equity programme to primary investments, between 20 and 30 percent to secondaries, and the remainder to coinvestments in its three-year target plan. The Government of Singapore Investment Corporation revealed in its latest annual report that it has set its long-term target allocation to private equity at between 11 and 15 percent. Nan Shan Life Insurance will invest in 10 to 15 alternative investment funds, with around $50 million to $300 million committed per fund. Daido Life Insurance revealed that it has invested in around 130 private equity funds and expects to commit to five to seven funds in the next 12 months. South Carolina Retirement System Investment Commission (RSIC) has switched its alternative investment consultant from Aon Hewitt Investing Consulting to Albourne America. As of July 1, Arizona State University has appointed BlackRock as its outsourced chief investment officer. The foundation s Investment Committee requested proposals from qualified investment firms in January. KDB Life Insurance is targeting opportunities in the European market. It prefers secondaries to other strategies as there is a shorter J-Curve associated with the investments. Local Pensions Partnership (LPP), a collaboration between Lancashire County Pension Fund and London Pensions Fund Authority, has issued proposals to look for external experts for the due diligence of alternative investments. n 8 PEI Q Fundraising Report

9 LP RADAR SIGNIFICANT LP COMMITMENTS IN Q LP NAME COMMITMENT AMOUNT (M) FUND NAME California Public Employees' Retirement System 500 CVC Capital Partners VII California Public Employees' Retirement System $550 Apollo Investment Fund IX California Public Employees' Retirement System $500 Onex Partners V New York State Common Retirement Fund (NYSCRF) $300 GSO Capital Solutions III Oregon State Treasury $250 CVC Capital Partners VII Oregon State Treasury $200 Tailwind Capital Partners III Massachusetts Pension Reserves Investment Management Board (MassPRIM) $200 GTCR Fund XII Massachusetts Pension Reserves Investment Management Board (MassPRIM) $150 Charlesbank Equity Fund IX New York State Common Retirement Fund (NYSCRF) $150 Rise Fund Minnesota State Board of Investment $200 Lexington Partners CIP IV PEI Q Fundraising Report 9

10 Platinum Level Case Study How can PEI s Research and Analytics team help you? SAMPLE CLIENT CASE STUDY This quarter, we helped a Chinese investment firm to focus their North American investments. We provided them with a list of North American GPs that have raised private equity funds with a target or actual size of $1.5 billion, excluding venture capital. We included information on sector focus and the LPs invested in each fund. Please do get in touch with us if you would like to see a sample of this data. PEI s Research and Analytics team is made up of researchers and analysts in London, New York and Hong Kong, working on a 24/5 cycle to perform bespoke research requests for you. We track the investment appetite and contact details of over 12,000 LPs and GPs within our fundraising data platform to help bring together fund investors and managers with matching interests. Platinum subscribers should dan.g@peimedia.com for more information on the research services available. WE ALSO PROVIDED SOLUTIONS TO THE FOLLOWING REQUESTS: Can you send me a list of Mexican and Brazilian banks with offices in London that invest in private equity, as well as a list of wealth management firms based in London? Could you send me a sample of 50 LPs headquartered in the Middle East, and a sample of funds active in the region? I would like a list of UK family offices that invest in private equity and a separate list of family offices and banks in the UK that invest in the Middle East 10 PEI Q Fundraising Report

11 NEW YORK 16 West 46th Street, 4th Floor New York NY Fax: LONDON 140 London Wall London EC2Y 5DN Fax: HONG KONG 19F On Hing Building 1 On Hing Terrace Central, Hong Kong Fax: