AlpInvest Annual Review 2011 Review Annual AlpInvest Annual Review 2011 AMSTERDAM NEW YORK HONG KONG AlpInvest Partners B.V. AlpInvest Partners Inc. AlpInvest Partners Ltd. Jachthavenweg 118 630 Fifth Avenue, 28th Floor 701 Citibank Tower 1081 KJ Amsterdam New York, N.Y. 10111 3 Garden Road The Netherlands U.S.A. Hong Kong China Phone: +31 20 540 7575 Phone: +1 212 332 6240 Fax: +31 20 540 7500 Fax: +1 212 332 6241 Phone: +852 2878 7099 Fax: +852 2878 7009 CONTENTS OUR BUSINESS 04 CHAIRMAN AND CEO’S STATEMENT 06 YEAR IN REVIEW 09 OPERATING COMMITTEE REVIEW 10 VALUE CREATION 12 FUND INVESTMENTS 14 SECONDARY INVESTMENTS 18 CO-INVESTMENTS 22 CORPORATE SOCIAL RESPONSIBILITY 26 GOVERNANCE 28 MANAGING PARTNERS 30 PARTNERS 32 HUMAN RESOURCES 34 REMUNERATION POLICY 35 RISK MANAGEMENT 36 FINANCIAL PERFORMANCE AND INVESTMENT OVERVIEW 38 PRIVATE EQUITY 49 ALPINVEST IRR CALCULATIONS 50 Throughout this document, “AlpInvest” or “AlpInvest Partners” refers to AlpInvest Partners B.V. and its subsidiaries. In considering the performance information contained herein, readers should bear in mind that the performance reflected herein is not necessarily indicative of future results, and there can be no assurance that any fund or investment will achieve comparable results. 3 OUR BUSINESS AlpInvest is one of the largest Over the past 12 years, we have achieved a strong performance track record, thanks to independent private equity the size of our programs, our dedicated and investors in the world. Established experienced team and our rigorous and integrated investment approach. in 1999, we have developed a robust global platform and a A leading player in the field, we have more than €31bn of assets under management (as per stable, experienced senior team. December 31, 2011). Between now and 2015, we have over €12bn of commitments available for new investments. Since our inception, we have been dedicated to investing across the private equity spectrum and across the globe. We invest in private equity funds through our primary and secondary funds programs and we invest directly in companies through our equity and mezzanine co-investments programs. The breadth of our approach helps us to forge close, long-term relationships with general partners (GPs) around the world. This in turn heightens our awareness of the opportunities at our disposal, provides us with genuine investment insights and enhances our selection process. Following a consistent strategy over the past 12 years, we have developed a strong track record. Highlights Scale Global reach We are one of the largest private equity Investment professionals investors in the world with more than 220 GP relationships and a global presence with offices in Amsterdam, Hong Kong and New York. 31 Amsterdam Size AlpInvest has 123 employees of whom 66 are investment professionals in Funds, Secondaries and Co- 28 New York Investments as per December 31, 2011. 07 Hong Kong An integrated investment approach We seek to leverage in-house knowledge to make better investment decisions. 4 AlpInvest Partners Annual Review 2011 Our size and scale give us access to opportunities AlpInvest and have committed €9bn for the globally, often before other managers in our 2012-2015 period. peer group. Our platform strengths result in competitive advantages, helping us to deliver healthy returns across the economic cycle. A leading player in the field, we have The quality of our operations further enhances more than €31bn of assets under the performance of our business. We adopt a management (as per December 31, disciplined approach both to conduct within the firm and to our investment processes. 2011). Between now and and 2015, we have over €12bn of commitments Over the years, we have become well known and well regarded in the private equity industry. We available for new investments. are widely recognised for our rigorous attention to detail, which has remained undimmed since we were founded at the turn of the century. In 2011, we entered a new chapter in our history. Our firm was acquired by the management of Initially set up to manage private equity AlpInvest and The Carlyle Group, one of the investments for APG and PGGM, the asset largest and most highly respected alternative managers for two of the largest Dutch pension asset managers in the world. AlpInvest continues funds, we managed these investments on an to operate independently from The Carlyle Group independent and exclusive basis for more than but we now benefit from having a partner with ten years. The stability of this relationship has extensive investor relationships. Together, we contributed to our standing within the industry intend to build on AlpInvest’s early successes and and underpinned our diligent investment develop an even stronger business for the future. approach. We continue to enjoy a close bond with both managers. They remain fully supportive of Commitments received from investors from inception to 2011 by investor type PAGE 33 – HR byPAGE investment 9 – Year In typeReview PAGE XX – Mezzanine 4 5 99.8% 0.2% 3 Pension funds Insurance 2 companies 1 1.0 0.8 0.6 0.4 0.2 by geography 0.0 1 €33.7bn Fund Investments 99.8% 0.2% 2 €6.0bn Secondary Investments 3 €6.4bn Equity Co-Investments Western Europe North America 4 €1.7bn Mezzanine Co-Investments 5 €1.1bn Other 5 CHAIRMAN AND CEO’S STATEMENT For AlpInvest, 2011 was an AlpInvest went through a year of transformation in 2011. Our Partners assumed joint ownership of the exceptional year. Our business business with The Carlyle Group, one of the largest was sold, our shareholder alternative asset management firms in the world. The new structure was announced at the beginning structure changed and our of 2011 and has created a fresh excitement investor base expanded. Even as and energy within AlpInvest and reinforced our commitment to delivering value for our investors. these exciting developments took place, we continued to attract We have become a genuine partnership. All our Partners have acquired an equity stake in the new capital, make investments business and continue to be deeply committed and achieve strong returns. We to its success over the medium and long term. Our interests are directly aligned with our had an active, successful year and shareholders, creating a cultural and financial we look to the future knowing we affinity with them. are better positioned than ever This is my first year as Chairman and CEO in this to take advantage of rewarding new setting and I am honored to be working with a group of such professional and experienced opportunities in the private Partners. We are all extremely pleased with the equity market. collaborative nature of our partnership with The Carlyle Group. There is a unity of purpose between us, a sense of excitement about the future and a firm belief that together we can take this business forward to a new phase. New relationships The new structure also enhances the relationship between AlpInvest and our former owners, APG and PGGM. These leading pension fund managers were not just our main shareholders but also our prime investors. APG and PGGM remain cornerstone investors and have committed €10bn to our latest investment programs, but the new setting also allows us to expand our investor base and we have already begun to do so. During 2011 and early 2012, we secured commitments totaling US$800m from two large U.S. pension plans. 6 AlpInvest Partners Annual Review 2011 AlpInvest strives to deliver consistently strong performance, using our broad geographical footprint, deep relationships with GPs and unique investment approach to make quality investments at the right time and the right price. VOLKERT DOEKSEN CHAIRMAN AND CEO The Carlyle Group has been an invaluable help in board so financial institutions, including banks, expanding our investor base. As a highly respected saw a sharp deterioration in the value of their alternative asset manager with global reach, it has assets. This occurred just as capital requirements developed close relationships with private equity for banks and insurers increased, creating a investors around the world. Its experience and ‘double whammy’ for many firms in the financial expertise are an immense support to AlpInvest sector. This affected both their willingness and as we develop this new area of our business. ability to invest in riskier assets, including high- yield bonds and leveraged loans. As debt markets However, we conduct our investment operations deteriorated, buyout transactions were affected too. completely independently of The Carlyle Group. Our investment approach is unchanged, as is our The change of attitude among many financial investment process, and our investment decisions institutions was entirely understandable. Before are made on an entirely independent basis. advancing equity or debt capital to private equity firms, investors need to have a clear sense of Strong performance prospects over the next three to five years. This We delivered a strong performance last year, visibility was simply not there during the summer despite the turbulent macroeconomic background and fall months so activity slowed sharply. and the transformation in our ownership structure. We believe we made high-quality investments The market slowdown clearly affected AlpInvest, and achieved many good exits. The first half of but the impact was not entirely negative. Fewer the year was particularly active in terms of both funds were raised in 2011 so our Fund Investments commitments made and exits achieved. Growing business redoubled their efforts to seek out economic uncertainty permeated the second quality opportunities. Thanks to our long-standing half and activity slowed. Nonetheless, our overall relationships with more than 200 general partners, performance was an improvement over 2010, we were able to make substantial commitments highlighting our ability to deliver strong returns during the year and even establish links with new across economic cycles.