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Welcome to the latest edition of Private Equity Spotlight, the Private Equity Spotlight monthly newsletter from Preqin providing insights into private equity July 2013 performance, investors, deals and fundraising. Private Equity Spotlight combines information from our online Feature Article products Performance Analyst, Investor Intelligence, Fund Manager The Venture Capital Conundrum Proﬁ les, Funds in Market, Secondary Market Monitor, Buyout Deals Analyst In this month’s feature article we look at the venture capital conundrum. Why are and Venture Deals Analyst. investors attracted to venture capital funds despite recent disappointing returns? Page 3

July 2013 Volume 9 - Issue 7 Industry Contribution

FEATURED PUBLICATION: Taken from the newly-launched 2013 Preqin Investor Network Global Alternatives Report, Stephen Cravens from Cogent Partners tells us what investors need to know 2013 Preqin Investor Network Global when assessing potential private equity investment opportunities. Alternatives Report Page 8

2013 Preqin Investor Network Global Alternatives Report Preqin Industry News

This month’s industry news looks at investor appetite for venture capital funds, as well as highlighting recent funds closes.

Investor Network Page 10 www.preqin.com/pin Compare. Connect. Invest.

Click here to ﬁ nd out more or to download your free copy. The Facts New York: One Grand Central Place 60 E 42nd Street Fundraising – Q2 2013 fundraising statistics. Page 12 Suite 2544 New York, NY 10165 Investors – LPs at, above or below their target allocations to private equity. Page 13 +1 212 350 0100

Buyout Deals – A summary of private equity-backed buyouts in the eurozone. Page 15 London: Equitable House 47 King William Street Venture Capital Deals – A look at healthcare investments and exits. Page 16 London, EC4R 9AF +44 (0)20 7645 8888 Performance Update – PrEQIn Private Equity Quarterly Index. Page 18

Singapore: Funds of Funds– Statistics on Asia-focused fund of funds vehicles. Page 20 One Finlayson Green #11-02 Singapore Conferences – Details of upcoming private equity conferences. Page 21 049246 +65 6305 2200 You can download all the data in this month’s Spotlight in Excel. San Francisco: 580 California Street Wherever you see this symbol, the data is available for free download on Suite 1638 Excel. Just click on the symbol and your download will begin automatically. You are welcome to use the data in any presentations you are preparing, San Francisco, CA 94104 please cite Preqin as the source. +1 415 635 3580

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Feature Article The Venture Capital Conundrum Download Data

The Venture Capital Conundrum

Investor appetite for venture capital funds remains high and new funds keep on being launched into the space. However, overall returns are low in comparison to other funds and there is a feeling that the industry won’t return to the heyday of the 90s. Ignatius Fogarty looks to answer the venture capital conundrum and understand what drives investor appetite?

Venture capital provides an important function in today’s economy Fig 1: Private Equity Horizon IRRs as of 31 December 2012 in assisting the growth of new and young companies. The goal of the venture capitalist is to identify new companies that they feel 30% have potential and provide equity to these fi rms at an early stage of their existence, with the overall goal of growing these companies 25% All Private and generating a return. There is the opportunity to make high Equity returns when investing in a venture capital fund, but there is also 20% Buyout the opportunity to lose a signifi cant amount of money as well. The 15% Venture 1990s saw the venture capital industry attract signifi cant publicity, as Capital venture capitalists invested in internet start-up companies, but when 10% Fund of the dot-com bubble burst many of these companies lost value very Annualized Returns Funds quickly and folded. One of the most notable of these was Pets.com, 5% Mezzanine which raised $82.5mn in an IPO in 2000, but folded nine months later. However, companies did survive the bubble and continue to 0% thrive; one of these, Amazon.com, continues to be at the forefront 1 Year to 3 Years to 5 Years to 10 Years to of e-commerce today. Dec-2012 Dec-2012 Dec-2012 Dec-2012 Source: Preqin Performance Analyst Performance of Venture Capital Funds

Compared to other private equity funds, venture capital funds as an aggregate $47bn in capital commitments. In 2012, 229 venture a group have more recently produced lower average returns for capital funds held a ﬁ nal close, securing an aggregate $32bn from investors; Fig. 1 shows Preqin’s horizon IRR data. Ten-year horizon investors as displayed in Fig. 2. IRR data to 31st December 2012 indicates that for all strategies, private equity generated a return of 19.0% and for buyout funds Investor appetite for venture capital funds has also increased over this was 23.4%; however, venture capital funds only generated an time. Twenty-eight percent of the LPs Preqin spoke to for its Investor average return of 4.4%. Outlook: Private Equity, H1 2013 that are looking to make new fund commitments in 2013, expected to commit to venture capital funds, Investor Appetite for Venture Capital as shown in Fig. 3. Furthermore, over 60% of investors tracked by Preqin’s Investor Intelligence online service have expressed an Despite other private equity strategies recently outperforming interest in, or have previously invested in, a venture capital fund, venture capital, investor appetite for this fund type remains strong which further demonstrates how widespread investor appetite for and fund managers are responding by launching new funds. As of this strategy is. July 2013, there were 397 venture capital funds seeking to raise

Fig. 2: Annual Venture Capital Fundraising, 2000 - 2013 YTD (As at 03 Fig. 3: Proportion of Investors Planning to Make New Commitments July 2013) to Venture Capital Funds in the Next 12 Months, 2010 - 2013

500 461 H1 2010 20% 450

400 H2 2010 11% 358 349 350 342 No. of Funds 300 300 Closed 300 H1 2011 28% 252 257 252 249 250 229 229 199 Aggregate H2 2011 22% 200 Capital Raised ($bn) 150 H1 2012 15% 100 79 75 47 44 52 51 40 50 30 38 26 27 32 H2 2012 25% 16 14 13 0 H1 2013 28% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0% 5% 10% 15% 20% 25% 30% Year of Final Close 2013 YTD Proportion of Respondents Source: Preqin Funds in Market Source: Preqin Investor Interviews, 2010 - 2013

Fig 4. Venture Capital Net IRR Dispersion by Vintage Year Fig 5. Venture Capital - Minimum, Median and Maximum IRRs by Vintage Year

25% 200%

20% 150%

15% 100% 10% Maximum IRR

5% 50% Median IRR 0% 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Net IRR since Inception Minimum IRR

-5% Net IRR since Inception -50% -10%

-100% -15% 2000 2002 2004 2006 2008 2010 2012 Vintage Year -150% Vintage Year Source: Preqin Performance Analyst Source: Preqin Performance Analyst

The Big Draw performing fund generated a return of -36.5%. The best funds of each vintage year are performing very well; however, the worst So what attracts investors to the venture capital industry when performing funds have negative IRRs, clearly demonstrating the it appears that, overall, the industry has not been performing as importance of selecting the best fund managers. Fig. 6 shows well as other fund types such as buyout? Looking further into the the Preqin Venture Capital Benchmark and demonstrates that the numbers, we can see that even though the overall benchmark majority of Q3 IRR quartiles are in the negative. In the 1990s the may indicate that, as a group, venture capital funds may not have industry was performing very well; looking at vintage 1997 funds, performed well, individually there are some great performing funds, the median IRR was 29.8% and the maximum was 267.8%. Preqin which drives overall investor sentiment. Fig. 4 shows the IRR has identifi ed over 164 venture capital funds with an IRR of over dispersion of venture capital funds, highlighting the difference in 30%. performance of this fund type. The majority of funds are clustered around the median; however, there is the occasional fund that Venture Capital Exits performs signifi cantly higher than the rest. These are the “home run funds” that drive investors to commit to venture capital funds. In recent years, venture capital exits have once again become signifi cant publicity events, the largest of which can be seen in Fig. Fig. 5 compares the minimum, median and maximum IRRs of venture 7. When a tech start-up is exited by its founders, these individuals capital funds by vintage year, illustrating the difference between the and their backers are celebrated widely, and stories of the growth top performing managers and the lowest performing fund managers. of their personal wealth dominate not just the fi nancial press, but For funds with a 2005 vintage, the best performing venture capital the mainstream media as well. The story of tech savvy students fund delivered its investors a return of 104.9%, whereas the worst building tech products in their dorm rooms, which then go on to

Fig. 6: Preqin Venture Capital Benchmark

Median Fund IRR Quartiles (%) IRR Max/Min (%) Vintage No. Funds Value (%) Called (%) Dist (%) DPI Q1 Median Q3 Max Min RVPI 2010 37 45.0 0.0 101.8 18.5 11.0 1.4 223.7 -13.6 2009 36 64.4 5.8 102.5 18.0 9.9 -5.7 37.4 -21.0 2008 91 71.8 12.7 87.9 14.9 5.9 -3.6 72.2 -23.3 2007 104 84.9 12.3 96.9 14.8 5.7 -1.3 62.0 -66.0 2006 98 91.3 20.2 80.9 10.8 4.1 -4.6 26.5 -56.8 2005 71 95.0 27.1 68.2 8.6 1.3 -6.4 104.9 -75.3 2004 62 98.7 33.7 64.7 6.8 2.0 -3.5 68.8 -21.0 2003 50 99.4 36.6 48.1 8.5 2.0 -3.8 35.1 -19.7 2002 61 100.0 58.2 28.8 9.0 2.8 -6.1 26.9 -47.2 2001 94 100.0 70.3 28.8 9.5 2.4 -4.6 30.4 -26.0 2000 144 100.0 61.0 19.3 5.8 -0.8 -6.3 52.9 -95.5 1999 82 100.0 62.0 8.9 5.7 -2.6 -12.3 154.7 -43.4 1998 71 100.0 108.7 0.5 17.9 6.3 -6.8 1015.7 -46.1 1997 69 100.0 181.4 0.0 71.9 29.8 4.8 267.8 -30.0 Source: Preqin Performance Analyst

be companies worth billions of dollars, is this generation’s story of Consistent Performance the self-made man. When Facebook issued its IPO, it was reported that Mark Zuckerburg’s personal wealth escalated to around $24bn, Investing with a successful venture capital fund manager can deliver and those venture capital fi rms that had backed him from the start an investor high returns. An example is Union Square Ventures, generated signifi cant returns for their investors. Accel Partners one of the venture capital fund managers that provided fi nancing invested in Facebook in 2005 and 2006 and now has approximately to Twitter. All of the funds that it has raised historically are in the a 10% stake in the company, which as of June 2013, is valued at top quartile for their respective vintage years, based on data from around $5.2bn. Instagram, another high profi le tech start up, was Preqin’s Performance Analyst. Its fi rst fund, Union Square Ventures, bought for $715mn by Facebook; it received funding from fi rms which has a 2004 vintage, signifi cantly outperforms the benchmark such as Andreessen Horowitz, Benchmark Capital and Greylock. for funds with the same vintge year. Other portfolio companies that Union Square Ventures has invested in include Tumblr (which in turn There has been speculation recently in regards to Twitter, estimated was recently bought by Yahoo.com for $1.1bn in cash), Foursquare to be valued at $11bn, going public in 2014, which would generate and Bluefi n Labs. signifi cant returns for backers such as Benchmark Capital, Charles River Ventures and Union Square Ventures. There is a view that These successful fund managers are able to continually attract the recent increase in investor appetite for venture capital has been capital from institutional investors for their vehicles. Insight Venture driven by these highly publicized events, which have made the Partners, a fi rm which has four of its six funds in the top quartile asset class more attractive to investors. However, not all exits are in their respective vintage years, secured $2.57bn for its latest successful in the long run. Zynga’s share price has dropped by 75% fund, Insight Venture Partners VIII, surpassing its target of $2.5bn. since its IPO in 2011 and Groupon has had similar struggles, giving Among its investors were Washington State Investment Board and the thought to many industry commentators that there potentially Los Angeles City Employees’ Retirement System. could be a “web 2.0” bubble in the not so distant future. However, it is not just the high profi le fund managers that can generate signifi cant returns for their investors. Jerusalem Partners,

Fig 7: Top 10 Venture Capital Exits by Exit Value, 2008 - 2013 YTD (As at 03 July 2013)

Initial Total Known Exit Exit Acquiror Firm Investment Investors Funding Exit Date Value Primary Industry Location Type (Exit) Date ($mn) ($bn) Accel Partners, DST Global, Elevation Partners, Firsthand Capital Management, General Atlantic, Goldman Sachs, Greylock Partners, Facebook Sep-04 GSV Capital, Hercules Technology Growth 2,617 May-12 IPO 16.0 - Internet US Capital, Meritech Capital Partners, Microsoft, T Rowe Price, The Founders Fund Management, TriplePoint Capital Burrill & Company, CDIB BioScience Venture Management, Horizon Technology Finance Trade Gilead Pharmasset, Inc. Jun-01 70 Nov-11 11.2 Pharmaceuticals US Corporation, Lumira Capital, MPM Capital, TVM Sale Sciences Capital Canaan Partners, Cardinal Venture Capital, SuccessFactors, Emergence Capital Partners, GGV Capital, Trade May-06 45 Dec-11 3.4 SAP Software US Inc. Greylock Partners, Lighthouse Capital Partners, Sale TPG Battery Ventures, Greenspring Associates, Trade Salesforce. ExactTarget, Inc. Jul-04 Insight Venture Partners, Scale Venture 193 Jun-13 2.5 Internet US Sale com Partners, Technology Crossover Ventures AllianceBernstein, Amerindo Investment Advisors, Integral Capital Partners, Mayﬁ eld Fund, Menlo Ventures, Open Field Capital, Trade Hewlett 3PARdata Jun-99 Oracle Corporation, Oracle Venture Fund, 178 Sep-10 2.4 Hardware US Sale Packard Sun Microsystems, Van Wagoner Capital Management, Veritas Software, Worldview Technology Partners Atlas Venture, Focus Ventures, GGV Capital, Trade Isilon Systems Aug-01 Madrona Venture Group, Sequoia Capital, 69 Nov-10 2.3 EMC Software US Sale Tenaya Capital Greylock Partners, New Enterprise Associates, Trade Data Domain Oct-02 26 Jul-09 2.1 EMC Software US Sutter Hill Ventures Sale Accel Partners, AOL Inc., General Catalyst Partners, Gold Hill Capital, Lehman Brothers, Kayak Software Trade Priceline. Jan-04 Norwest Venture Partners, Oak Investment 229 Nov-12 1.8 Internet US Corporation Sale com Partners, Sequoia Capital, Silicon Valley Bank, Trident Capital Attractor Investment Management, Hummer Trade Adobe Omniture May-04 Winblad Venture Partners, Scale Venture 80 Sep-09 1.8 Marketing US Sale Systems Partners, WPP Fresenius Bain Capital, Ignition Venture Partners, KRG Trade Liberty Dialysis Apr-10 - Aug-11 1.7 Medical Care Healthcare US Capital Sale AG

Source: Preqin Venture Deals Analyst

based in Israel, is another consistent performing manager; three Fig. 8: Proportion of Number of Venture Capital Deals in each out of its six funds are in the top quartile for their vintage years with Region, 2013 YTD (As at 03 July 2013) the other three funds in the second quartile. It invests in technology companies based in Israel and the US. The increasing globalization of the asset class has seen investors being attracted to opportunities 5% outside of the traditional private equity hubs of North America and 10%

Europe. So far during 2013, Asian venture capital deals have North America accounted for 10% of all deals globally, as shown in Fig. 8. Europe 23%

With so many venture capital funds on the road, it is important 62% Asia that investors are able to distinguish between the opportunities available because as demonstrated in this article, while there are Rest of World some funds that can offer excellent returns, there are many that will not. A key part of due diligence is understanding a fund manager’s track record, as it is clear that there is a relationship between a fund manager’s predecessor fund and successor fund. Fig. 9 shows that 40% of fund managers with a top quartile fund go on to have their next fund also ranked in the top quartile. In turn, 70% of top quartile Source: Preqin Venture Deals Analyst fund managers go on to achieve above median-fund performance with their next fund. In comparison, only 33% of fund managers with Fig. 9: Venture Capital - Relationship between Predecessor and a bottom quartile fund then go on to exceed the median benchmark Successor Fund Quartiles with their next fund. Past performance should be a fundamental consideration for investors when looking at a new opportunity; 100% 13% however, it is important to note that past performance is no absolute 90% 24% 28% Top Quartile guarantee of future performance. 80% 40% 20% Successor Fund 70% The Outlook Second Quartile 60% 28% 30% Successor Fund 50% 36% For an institutional investor, venture capital is a key component 30% Third Quartile 40% Successor Fund of a balanced and diversifi ed investment portfolio. The venture 26% capital industry will continue to generate interest, as fund managers Proportion of Funds 30% 23% Bottom Quartile 20% 18% continue to look for the next big thing, the lottery winning investment, Successor Fund 31% and many institutional investors buy into this story. We are in an 10% 22% 19% 12% exciting time of technical innovation and growth, and there is a 0% Bottom Quartile Third Quartile Second Quartile Top Quartile defi nite buzz around the industry. Looking at Preqin’s Performance Predecessor Predecessor Predecessor Predecessor Analyst, it is clear that there are many great fund managers out there Fund Fund Fund Fund that have the ability to spot good deals and excellent opportunities; Source: Preqin Performance Analyst however, there are many out there that will not be as successful, as demonstrated by the low returning investments and the poor performance of the overall benchmark. For every Facebook, Instagram and Tumblr, there are other companies and ideas that will not turn a profi t and will fold. However, this is the nature of venture capital investment, and it is what makes it a compelling story as investors look for that “home run” investment.

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Sponsor Industry Contribution Due Diligence: What Do Investors Need to Know? Download Data

kExcerpt from the 2013 PIN Global Alternatives Report:

Due Diligence: What Do Investors Need to Know When Assessing Potential Private Equity Investment Opportunities? - Stephen Cravens, Head of Fund Analytics, Cogent Partners

Investors are taking a fresh approach to underwriting private equity put other investors on more attractive footing? LPs should include commitments to both new and legacy relationships. Driven by the in the course of due diligence interviews with portfolio company collective learning in the aftermath of the fi nancial crisis, as well as executives, intermediaries of past transactions, as well as current the natural progression away from funds of funds and discretionary or former LPs (ideally those on the advisory board). mandates, more LPs are deciding to do the work themselves. While this is often diffi cult to verify, the general partners’ capital Investors are taking on this directive in order to avoid mistakes and commitment should represent a meaningful portion of their personal achieve higher returns with the belief that only top managers can net worth. Team cohesion is also hugely important, and you should materially outperform a more liquid investment program over time. ask yourself if this is a team that you can see staying intact for a decade or more. Due diligence should uncover whether there has Discerning LPs set out to gain confi dence in a manager’s been any irregular turnover or whether the partners responsible for investment process, understand its team dynamics and business past success are still with the fi rm. Is succession being managed practices, verify its operational procedures, and check references. with steps in place to transfer ownership of the fi rm from senior Focusing on these issues is especially critical since you are locking partners to the next generation? Seeing carry pushed down far into up your money for many years. One must do the homework to the organization gives comfort that the broader team is properly cross-examine the selling points represented in the marketing incentivized. If the new fund is much larger, is it reasonable to think materials and understand what differentiates managers from their that this team can be successful either hiring rapidly or competing peer group. for signifi cantly larger transactions?

While past performance is an indicator of quality, understanding Thanks in large part to initiatives pushed by the ILPA, terms are how managers achieved their results is more relevant to answering moving in the investor’s direction, characterized by better alignment the main question: is it likely that they will repeat past success? of interests. The balance between management and performance And further, will the investor’s take be meaningful enough to justify fees should provide ample motivation to generate strong returns. bearing the intrinsic risks? Preferred hurdles and back-end weighted carry protect economics for limited partners, and a strong key man clause provides a layer Potential investors need to understand the track record in detail, of protection against an unstable organization. not just the headline IRR numbers. What types of companies have been bought and sold, and at what multiples? Which investments The difference in performance between top and average players have not been realized and why? What happened to the underlying is enormous in private equity and therefore manager selection is companies’ fundamentals (revenue, EBITDA, and net debt)? Is crucial. Building an effi cient system to work through and decode performance built on a home run that might be luck, or rather a the provided materials will allow for important synthesis to take consistent track of meaningful realizations? Was there a process place, resulting in productive in-person meetings and stronger GP for generating the ideas that led to their investments or was it more relationships. These relationships are key because top managers reactionary? Be bold in asking what the market ineffi ciencies are are generally less accessible, requiring more effort on the part of that produced prior success and further, to be convinced that those new relationships. ineffi ciencies will remain. The legal structure and lock-up timeline of private equity LPs must also understand whether the manager generated returns partnerships provide limited partners very little control over the by actively improving the companies or through fortuitous timing. outcome (apart from a secondary transaction). Rigorous due If a previous fund’s returns were dominated by a single sector or diligence is the primary line of defense and will best position your geography, potential investors need to be able to identify that in portfolio to outperform. short order. LPs are wise to ground in truth a manager’s claim of proprietary deal fl ow. The longer (and more realized) the track record, the more predictive value there is in historical results. With Cogent Partners so many funds in the market vying for your attention, it’s crucial to identify these key points of differentiation early on in the process. Cogent Partners is a full-service specialty investment bank focused on alternative assets with a track record of providing Once you have assimilated the information in the data room and the highest level of advisory services to private equity conducted a fi rst meeting, it’s perfectly reasonable to ask for investors worldwide. additional materials. Ask for investment memos. Ask which fi rms they believe to be their closest competitors. Ask how many of their www.cogent-partners.com existing LPs they expect to re-up. Are there any side-letters that

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Preqin Industry News: Venture Capital Funds

With investor appetite for venture capital funds continuing to increase, Louise Weller looks at investors that have committed to venture capital funds recently and investor appetite for this fund type in the year ahead, as well as recent fund closes.

A number of venture capital funds on the road How Many Venture Capital Funds are have recently received investor commtiments: Currently in Market?

Chart of the Month: Private Equity Funds in Market by Fund Type New Mexico Educational Retirement Board committed $30mn to (As at 03 July 2013) the third vehicle in the series raised by DRI Capital, Drug Royalty 400 397 III, which is targeting $1bn. Drug Royalty III is a venture capital fund that focuses on opportunities in North America, Europe and 350 300 Asia. The $10.1bn public pension fund committed $40mn to its 276 predecessor fund, Drug Royalty II. 250 229 218 No. of Funds in European Investment Bank (EIB) committed €20mn to Capital 200 Market 155 North Africa Venture Fund II, a venture capital vehicle that will 150 122 focus on investments in the Maghreb region. Capital Invest is 100 Aggregate Target Capital 67 63 62 targeting €100mn for its latest vehicle. EIB committed €5mn to its ($bn) 45 47 40 50 39 31 predecessor fund, Capital North Africa Venture Fund, which held a 20 22 ﬁ nal close on €50mn in 2007. 0 Other Funds Buyout Growth Fund of Capital Venture Mezzanine Distressed Secondaries

Investors continue to have an appetite for Equity Private venture capital funds: Source: Preqin Funds in Market

Several venture capital funds have recently AsahiGlass Company (AGC) plans to make between one and held final closes: fi ve new venture capital fund commitments over the coming year. It expects to commit to funds that focus on opportunities in the technology sector in the US, Europe and Asia. Accel Big Data Fund II appeared in the top fi ve venture capital funds to close in June 2013, with a $100mn fi nal close. The fund, Comerica Capital Advisors is looking to make new commitments managed by Accel Partners, invests in early stage start-ups. to venture capital funds over the next 12 months. It plans to only invest in North America-focused venture capital funds and is Another notable fund, HighBAR Partners II, managed by HighBAR looking to work with existing managers in its portfolio in addition to Partners, held a fi nal close on $130mn towards the end of June, forming new GP relationships. exceeding its $100mn target size. The early stage fund invests in software, technology and IT infrastructure industries in the US. Towers Perrin Retirement Plan for US Employees is looking to commit to Asia-focused venture capital vehicles in H2 2013. The CITIC Capital held a fi nal close of $113mn for its debut venture $2bn private sector pension fund will be mainly forging new GP capital all-stage fund, CITIC Capital Venture Partners. The fund relationships over the next 12 months. focuses specifi cally on investment opportunities in China.

Do you have any news you would like to share with the readers of Spotlight? Perhaps you’re about to launch a new fund, have implemented a new investment strategy, or are considering investments beyond your usual geographic focus?

Send your updates to [email protected] and we will endeavour to publish them in the next issue.

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Fund Coverage: 30,431 Funds

4,166 PE Real 694 Infrastructure 14,117 Private Equity* Funds 11,943 Hedge Funds Estate Funds Funds

Firm Coverage: 14,880 Firms

1,784 PERE 7,022 PE Firms 5,690 Hedge Fund Firms 383 Infra. Firms Firms

Performance Coverage: 12,613 Funds (IRR Data for 5,074 Funds and Cash Flow Data for 2,275 Funds)

1,127 PERE 5,303 PE Funds 6,041 Hedge Funds 142 Infra. Funds Funds

Fundraising Coverage: 12,664 Funds Open for Investment/Launching Soon Including 1,955 Closed-Ended Funds in Market and 393 Announced or Expected Funds

1,609 PE Funds 9,873 Hedge Funds 936 PERE 246 Infra. Funds Funds

Deals Coverage: 77,155 Deals Covered; All New Deals Tracked

29,943 Buyout Deals** 44,483 Venture Capital Deals*** 3,363 Infra. Deals

Investor Coverage: 10,959 Institutional Investors Monitored, Including 7,802 Verified Active**** in Alternatives and 82,840 LP Commitments to Partnerships

2,008 Active 5,130 Active PE LPs 4,206 Active Hedge Fund Investors 3,833 Active RE LPs Infra. LPs

Alternatives Investment Consultant Coverage: 447 Consultants Tracked

Fund Terms Coverage: Analysis Based on Data for Around 7,500 Funds

Best Contacts: Carefully Selected from Our Database of over 245,055 Active Contacts

Plus The Preqin Difference - Over 150 research, support and development staff Comprehensive coverage of: - Global presence - New York, London, Singapore and San - Placement Agents - Dry Powder Francisco - Fund Administrators - Compensation - Depth and quality of data from direct contact methods - Law Firms - Plus much more... - Unlimited data downloads - Debt Providers - The most trusted name in alternative assets

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*Private Equity includes buyout, venture capital, distressed, growth, natural resources and mezzanine funds. **Buyout deals: Preqin tracks private equity-backed buyout deals globally, including LBOs, growth capital, public-to-private deals, and recapitalizations. Our coverage does not include private debt and mezzanine deals. ***Venture capital deals: Preqin tracks cash-for-equity investments by professional venture capital firms in companies globallyacross all venture capital stages, from seed to expansion phase. The deals figures provided by Preqin are based on announced venture capital rounds when the capital is committed to a company. ****Preqin contacts investors directly to ensure their alternatives programs are active. We emphasize active investors, but clients can also view profiles for investors no longer investing or with programs on hold. The Facts Fundraising in Q2 2013 Download Data

Fundraising in Q2 2013

Laura Duce takes a look at private equity funds closed in Q2 2013 that exceeded their target size, including the top funds to close in the quarter that beat their target.

In terms of aggregate capital raised, Q2 2013 was the strongest quarter Fig. 1: Fundraising Success of Private Equity Funds Closed in Q2 for private equity fundraising since Q4 2008, with 154 funds holding a 2013: First-Time Funds vs. Non-First-Time Funds ﬁ nal close securing an aggregate $122bn. Examining the funds that closed in the quarter, half exceeded their original target size and an 100% additional 14% were able to match their fundraising target. 90%

80% 40% In terms of fund type, the largest amount of capital was raised by 51% 70% buyout vehicles, garnering an aggregate $49bn, and with a signiﬁ cant Exceeded Target 71% of buyout funds exceeding their targets. The most signiﬁ cant type 60% 13% by number of funds was venture capital, with 48% of the 35 vehicles 50% Met Target exceeding their targets, raising a collective $6.4bn. 40% 14% Below Target

Proportion of Funds 30% Subscriber Quicklink: 47% 20% 34% Subscribers to Preqin’s Funds in Market can access intelligence 10%

on all 154 equity funds closed in Q2 2013 using the Recently 0% Closed Funds feature. First-Time Funds Non-First-Time Funds

Source: Preqin Funds in Market Not yet a subscriber? Click here to arrange a demonstration: www.preqin.com/ﬁ m

Fig. 3: Private Equity Funds Closed in Q2 2013 that Exceeded their Fig. 2: Fundraising Success of Private Equity Funds Closed in Q2 Target Size: Amount of Capital Secured Compared to Predecessor 2013 by Time Spent on the Road Fund in Series

100% 14% 90% 3% 80% 42% 43% 14% 15% Raised 0-50% of 70% 58% 60% 63% Predecessor Fund Exceeded Target Size 60% 8% 50% 100% Met Target Raised 51-100% of Predecessor Fund 40% Size 71% Below Target 30% 25% 20% 57% 83% Proportion of Funds 50% Raised 101% or More 20% 38% of Predecessor Fund Size 10% 17% 20% 0% 1 - 6 7 - 12 13 - 18 19 - 24 25 - 30 31 - 36 More Months Months Months Months Months Months than 36 Months

Source: Preqin Funds in Market Source: Preqin Funds in Market

Fig. 4: Five Largest Private Equity Funds Closed in Q2 2013 that Exceeded their Target Size

Target Size Final Close Fund Vintage Firm Fund Type Fund Focus Placement Agent(s) Used (bn) Size (bn) Silver Lake Partners IV 2013 Silver Lake Buyout 7.5 USD 10.3 USD US Credit Suisse Private Fund Group Principle Advisory Services, Riverstone Global Energy Riverstone Natural 2012 6.0 USD 7.7 USD US TransPaciﬁ c Group, FirstPoint Equity and Power Fund V Holdings Resources Advisors Cinven V 2012 Cinven Buyout 5.0 EUR 5.3 EUR Europe Credit Suisse Private Fund Group Kohlberg Kravis KKR Asia Fund II 2012 Buyout 4.0 USD 6.0 USD Asia Not Used Roberts Triton Fund IV 2013 Triton Buyout 2.4 EUR 3.3 EUR Europe Lazard Private Fund Advisory Group Source: Preqin Funds in Market

Francesca Braganza looks at LPs that are at, above or below their target allocations to private equity. Which LPs are more likely to be below their target allocation to the asset class and which ones are over allocated?

Fig. 1: Proportion of Investors At, Above or Below Their Target Fig. 2: Proportion of Investors At, Above or Below Their Target Allocation to Private Equity Allocation to Private Equity By Geographic Location

100% 11% 15% 90% 18% 26% 23% 80% Above Target Allocation 70% 26% Above Target 44% 47% Allocation 60% 27% 44% At Target Allocation 50% At Target Allocation 40% Below Target 33% 30% 59% Below Target Allocation Proportion of Investors Allocation 46% 42% 20% 37% 10%

0% North America Europe Asia Rest of World

Geographic Location Source: Preqin Investor Intelligence Source: Preqin Investor Intelligence

Fig. 3: Proportion of Investors At, Above or Below Their Target Fig. 4: Under-Allocated Investors Split by the Percentage of Assets Allocation to Private Equity By Type under Management They Are Below Their Target Allocation

100% 4% 30% 11% 11% 17% 15% 16% 90% 24% 27% 33% 28% 25% 80% Above Target 25% 70% Allocation 61% 47% 60% 56% 31% 11% 52% 59% 33% 58% At Target 20% 50% Allocation 40% 15% 15% 14% 30% 56% Below Target 42% 45% Allocation

Proportion of Investors 20% 33% 36% 39% 30% 26% 26% 10% 10% 10% 9%

0% Proportion of Investors

5% Plans Funds Insurance Agencies

Companies 0% Endowment Foundations Banks & Banks Government Family Offices Private Sector Private Pension Funds Pension

Public Pension 0-1% 1.01-2% 2.01-3% 3.01-4% 4.01-5% More than 5% Asset Managers Investment Banks Investment Proportion of Assets under Management Source: Preqin Investor Intelligence Source: Preqin Investor Intelligence

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Buyout Deals: Activity in the Eurozone

With the aggregate value of private equity-backed buyout deals in the eurozone in H1 2013 alone representing 87% of the total buyout deal value for the region in the whole of 2012, Jessica Hull takes a closer look at private equity-backed buyout deals and exits in the region.

Fig. 1: Number and Aggregate Value of Private Equity-Backed Fig. 2: Proportion of Number of Private Equity-Backed Buyout Deals in Buyout Deals in the Eurozone, H1 2006 - H1 2013 the Eurozone by Country, 2006 - H1 2013

300 70 100% 8% 5% 6% 8% 5% 6% 7% 7%

Aggregate Deal Value (€bn) 90% 4% 6% 7% 6% 7% 3% 2% 60 5% 6% 3% 250 5% 5% 3% 3% 8% 4% 6% 80% 10% 8% 11% 8% 50 10% 13% 10% 200 9% 12% 10% 70% 9% 10% 12% 40 5% 9% 14% 60% 16% 10% 150 11% 11% 11% 9% 8% 30 50% 20% 100 21% 21% 21% 25% No. of Deals 23% 20 40% 22% 24% 30% 50 10 Proportion of No. Deals 20% 38% 0 0 32% 32% 33% 31% 29% 27% 30% H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 10%

2006 2007 2008 2009 2010 2011 2012 2013 0% 2006 2007 2008 2009 2010 2011 2012 H1 2013 No. of Deals Aggregate Deal Value (€ bn) France Germany Italy Netherlands Spain Belgium Finland Other Source: Preqin Buyout Deals Analyst Source: Preqin Buyout Deals Analyst

Fig. 3: Number of Private Equity-Backed Exits in the Eurozone by Type and Aggregate Exit Value, H1 2006 - H1 2013

140 40

120 35

30 Subscriber Quicklink: 100 Aggregate Exit Value (€bn) Aggregate Exit Value (€bn) 25 80 Subscribers to Preqin’s Buyout Deals Analyst can click here 20 60 to access 5,020 deals in the eurozone. Search for deals by No. of Exits 15 industry, type and size and obtain key information on the 40 10 European buyout market. 20 5

0 0 Not yet a subscriber? For more information, please visit: H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 2006 2007 2008 2009 2010 2011 2012 2013 www.preqin.com/buyoutdeals IPO Restructuring Sale to GP Trade Sale Aggregate Exit Value (€ bn) Source: Preqin Buyout Deals Analyst

Fig. 4: Top Five Private Equity-Backed Buyout Deals in the Eurozone, H1 2013

Investment Deal Deal Size Primary Firm Deal Status Investors Bought From/Exiting Company Location Type Date (€bn) Industry EQT Partners, Government Springer SBM Buyout Jun-13 3.3 Announced BC Partners of Singapore Investment Germany Publishing Corporation (GIC) ista Buyout Apr-13 3.1 Announced CVC Capital Partners Charterhouse Capital Partners Germany Energy CeramTec GmbH Buyout Jun-13 1.5 Announced Cinven Rockwood Holdings Germany Manufacturing Bain Capital, Clessidra Capital Financial Cerved Buyout Jan-13 1.1 Completed CVC Capital Partners Italy Partners Services Abengoa, First Reserve Environmental Befesa Medio Ambiente Buyout Apr-13 1.1 Announced Triton Spain Corporation Services

Source: Preqin Buyout Deals Analyst

Venture Capital Deals: Healthcare

Venture capital deals in the healthcare sector in Q2 2013 have shown an increase of 66% in terms of aggregate value compared to Q1 2013. Gemma Morris explores the make-up of healthcare deals since 2008.

Fig. 1: Number and Aggregate Value of Healthcare Deals Globally, Fig. 2: Proportion of Number of Healthcare Deals by Stage, 2008 - Q1 2008 - Q2 2013 H1 2013

300 3.5 Angel/Seed 2%

Aggregate Deal Value ($bn) Series A/Round 1 250 3.0 4% 4% 2% 7% 2% 16% Series B/Round 2 2.5 200 Series C/Round 3

2.0 Series D/Round 4 and 150 14% Later 1.5 Unspecified Round No. of Deals 100 32% Growth 1.0 Capital/Expansion 9% Add-on and Other 50 0.5 8% Venture Debt

PIPE 0 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Grant 2008 2009 2010 2011 2012 2013 No. of Deals Aggregate Deal Value ($bn) Source: Preqin Venture Deals Analyst Source: Preqin Venture Deals Analyst

Fig. 3: Proportion of Number and Aggregate Value of Healthcare Fig. 4: Number and Aggregate Value of Healthcare Deals as a Deals by Industry, 2008 - H1 2013 Proportion of All Venture Capital Deals Globally, 2008 - H1 2013

100% 35% 6% 3% 33% 90% 10% 11% 30% Healthcare IT 27% 80% 12% 26% 25% 16% 25% 24% 70% Medical Technologies 22% 21% 18% 20% 19% 60% Healthcare 20% 18% 20% 18% 16% 50% Medical Devices 19% 15% 40% Biotechnology 20% 10% Pharmaceuticals Proportion of Total

Proportion of Total 30% Other 20% 35% 5% 25% 10% 0% 2008 2009 2010 2011 2012 H1 2013 0% 3% 3% No. of Deals Aggregate Deal Value No. of Deals Aggregate Deal Value Source: Preqin Venture Deals Analyst Source: Preqin Venture Deals Analyst

Fig. 5: Top Five Venture Capital Healthcare Deals Globally by Deal Size, H1 2013

Firm Stage Deal Date Deal Size ($mn) Investors Location Intrexon Corporation Series F/Round 6 May-13 150 Third Security US ShanghaiMed Healthcare, Growth Capital/ Goldman Sachs Merchant Banking Division, Government of Apr-13 100 China Inc. Expansion Singapore Investment Corporation (GIC) Alvine Pharmaceuticals Unspeciﬁ ed Round May-13 70 Abbott Biotech Ventures US Proteus Digital Health Series F/Round 6 May-13 63 Novartis Venture Funds, Oracle Corporation US Adage Capital Management, Brookside Group, Celgene, Delphi PTC Therapeutics, Inc. Unspeciﬁ ed Round Mar-13 60 Ventures, HBM Partners, Jennison Associates, Longwood Fund, US Novo A/S, The Column Group, Vulcan Capital Source: Preqin Venture Deals Analyst

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Subscribers to Preqin’s Venture Deals Analyst can click here to access 9,979 venture capital deals in the healthcare industry. View detailed information on ﬁ nancing rounds and locations to see who the most active fund managers are in the healthcare space. Not yet a subscriber? For more information, or to register for a demonstration, please visit: www.preqin.com/vcdeals

The Report is the most comprehensive review of the alternatives industry aimed exclusively at institutional investors ever undertaken. It includes in-depth analysis on:

Methods of investing in alternative assets.

Performance of alternative assets, 2013 Preqin Investor Network Global Alternatives including industry benchmarks. Report Alternative funds open for investment, including league tables.

Consistent performing managers, and top performing funds.

Terms and conditions, funds of funds, Investor Network www.preqin.com/pin Compare. Connect. Invest. secondary market, and more.

Plus hear from some of the industry’s most significant voices, including David Rubenstein, Josh Lerner, and Luke Ellis.

For more information, or to download a free copy, please visit: www.preqin.com/PIN2013 The Facts PrEQIn Private Equity Quarterly Index Data – Q4 2012 Download Data

PrEQIn Private Equity Quarterly Index: Buyout Funds vs. Venture Capital Funds

Emma Underwood examines the latest figures from the PrEQIn Private Equity Quarterly Index, comparing buyout fund size with venture capital investment stage.

Buyout Funds Fig. 1: PrEQIn - Private Equity Quarterly Index: Buyout by Fund Size*

By plotting the PrEQIn Buyout Mega Cap, Large Cap, Mid Cap and 350 Small Cap Indices, all rebased to 100 as of 31st December 2000, 300 Fig. 1 allows us to examine the relative performance within the buyout PrEQIn Buyout sector by fund size. The graph shows that initially, all four indices 250 Mega Cap declined until Q1 2003, after which they began to climb. All four indices 200 PrEQIn Buyout peaked during 2007; however, following the onset of the ﬁ nancial Large Cap crisis, all indices fell sharply, with the Mega Cap Index experiencing 150 Index Returns the steepest decline, falling below the Large and Small Cap Indices PrEQIn Buyout 100 for the ﬁ rst time. Mid Cap 50 PrEQIn Buyout From Q1 2009 onwards, all indices began to recover at a similar rate, (Rebased to 100 as of 31-Dec-2000) 0 Small Cap and despite a small drop in all indices in Q2 2011, they have continued to climb, with the Mega Cap Index returning as top performer from Q1 30-Jun-01 30-Jun-02 30-Jun-03 30-Jun-04 30-Jun-05 30-Jun-06 30-Jun-07 30-Jun-08 30-Jun-09 30-Jun-10 30-Jun-11 30-Jun-12

2012 onwards. The latest quarter has seen an increase in all indices, 31-Dec-00 31-Dec-01 31-Dec-02 31-Dec-03 31-Dec-04 31-Dec-05 31-Dec-06 31-Dec-07 31-Dec-08 31-Dec-09 31-Dec-10 31-Dec-11 31-Dec-12 with the Mega Cap Index experiencing the greatest rise. Source: Preqin Performance Analyst

Venture Capital Funds *Size ranges: Vintage 1992-1996: Small Buyout ≤ $200mn, Mid Buyout $201mn-$500mn, Large Buyout > $500mn Vintage 1997-2004: Small Buyout ≤ $300mn, Mid Buyout $301mn-$750mn, Large Buyout Fig. 2 shows the PrEQIn Venture Capital Index split out by venture $751mn-$2bn, Mega Buyout > $2bn capital investment stage focus. This allows us to gain an insight Vintage 2005-2010: Small Buyout ≤ $500mn, Mid Buyout $501mn-$1.5bn, Large Buyout into the relative performance of early stage and expansion funds in $1.51bn-$4.5bn, Mega Buyout > $4.5bn comparison to venture capital funds that have no speciﬁ c investment Fig. 2: PrEQIn - Private Equity Quarterly Index: Venture Capital by stage focus. The graph shows that the PrEQIn Early Stage Index and Investment Stage the PrEQIn Venture All Stages Index follow similar trends, declining initially until Q3 2003 and then gradually recovering until Q4 2007, 180 when a further decline was experienced due to the ﬁ nancial crisis. 160

140 PrEQIn Early In comparison, the PrEQIn Expansion Index shows more variation. Stage After an initial decline, the Index recovers, increasing to 128.8 in Q4 120 2007. After the subsequent decline following the 2008 ﬁ nancial crisis, 100 PrEQIn Expansion the Expansion Index showed quarterly increases until Q2 2011, after 80 which the Index dipped before recovering to 164.9 as of Q4 2012. Index Returns 60 PrEQIn Venture Capital All 40 Stages

20 (Rebased to 100 as of 31-Dec-2000) 0 30-Jun-01 30-Jun-02 30-Jun-03 30-Jun-04 30-Jun-05 30-Jun-06 30-Jun-07 30-Jun-08 30-Jun-09 30-Jun-10 30-Jun-11 30-Jun-12 31-Dec-00 31-Dec-01 31-Dec-02 31-Dec-03 31-Dec-04 31-Dec-05 31-Dec-06 31-Dec-07 31-Dec-08 31-Dec-09 31-Dec-10 31-Dec-11 31-Dec-12 Source: Preqin Performance Analyst

Data Source:

Preqin’s Performance Analyst contains full metrics for over 6,300 named vehicles, including over 1,500 buyout funds and 1,600 venture capital funds.

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18 Private Equity Spotlight, July 2013 © 2013 Preqin Ltd. www.preqin.com Leveraged debt volumes are up in 2013... 40 36 32 28 24 20 16 Billion ($) 12 8 4 0 Source: Dealogic; data includes high yield bond and leveraged loan volumes, Western Europe and Nordics. 2012 2013 Jan Feb Mar Apr May ... join the people who are making it happen at

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Asia-Focused Funds of Funds

Patrick Adefuye provides detailed statistics on the Asian fund of funds market.

Fig. 1: Annual Asia-Focused Private Equity Funds of Funds Fundraising, Fig. 2: Proportion of Capital Contributed to Global Funds of Funds 2007 - 2013 YTD (As at 01 July 2013) Fundraising by Asia-Focused Funds of Funds, 2007 - 2013 YTD (As at 01 July 2013)

20 50% 18 18 18 45% 43% 16 40% 16 15 14 35% 13 No. of Funds 12 12 Closed 30% 26% 10 25% 20% 8 Aggregate 17% 6.0 Capital Raised 15% 12% 6 ($bn) 11% 4.0 4.1 Capital Proportion of Total 10% 9% 4 7% 3.1 2.8 3 2.7 5% 2 1.5 0% 0 2007 2008 2009 2010 2011 2012 2013 YTD 2007 2008 2009 2010 2011 2012 2013 YTD

Year of Final Close Year of Final Close Source: Preqin Funds in Market Source: Preqin Funds in Market

Fig. 3: Top Five Asia-Focused Private Equity Funds of Funds Closed by Final Close Size

Fund Firm Fund Size (mn) Year of Final Close Firm Location Guochuang Kaiyuan Fund of Funds China Development Bank Capital 15,000 CNY 2013 China Axiom Asia III Axiom Asia Private Capital 1,150 USD 2012 Singapore Asia Alternatives Capital Partners II Asia Alternatives Management 950 USD 2008 Hong Kong Axiom Asia II Axiom Asia Private Capital 950 USD 2010 Singapore Asia Alternatives Capital Partners III Asia Alternatives Management 908 USD 2012 Hong Kong

Source: Preqin Funds in Market

Fig. 4: Top Five Asia-Focused Private Equity Funds of Funds in Market (As at 01 July 2013)

Fund Firm Target Size (mn) Firm Location GC Oriza Fund of Funds Oriza Holdings 5,000 CNY China Emerald Hill Capital Partners III Emerald Hill Capital Partners 400 USD Hong Kong Squadron Asia Paciﬁ c Fund III FLAG Squadron Asia 400 USD Hong Kong Eagle Asia Fund II Eagle Asia Partners 350 USD Singapore Jade China Value Partners II Jade Invest 300 USD China Source: Preqin Funds in Market

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Subscribers to Preqin’s Investor Intelligence can click here to view detailed information on 30 Asia-based fund of funds managers.

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Conferences Spotlight

Conference Dates Location Organizer

Family Ofﬁ ce and Private Wealth Management Forum 22 - 24 July 2013 Newport, Rhode Island Opal Financial Group

Leveraged Finance 2013 2 - 3 September 2013 London Euromoney

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Capital Creation 16 - 18 September 2013 Monte Carlo World Business Research 30 September - 2 October European Alternative Investing Summit Monaco Opal Financial Group 2013 SuperReturn Middle East 6 - 9 October 2013 Abu Dhabi ICBI

Endowment and Foundation Forum 7 - 9 October 2013 Boston Opal Financial Group

Family Ofﬁ ce and Private Wealth Management Forum - West 23 - 25 October 2013 Napa, California Opal Financial Group

Alternatives Investment Series 2013 18 November 2013 Hong Kong Daiss Associates

Leveraged Finance 2013 Conference

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Date: 16 - 18 September 2013 Information: www.capitalcreationeurope.com Location: Monte Carlo, Monaco Organiser: Worldwide Business Research

Capital Creation 2013 is the post-summer meeting place for the who’s who of European and international leading private equity players. The event features an unmatched quality of networking and will be perfectly timed to provide you with clear sense of the parameters that will define the new era the private equity industry is entering.

All rights reserved. The entire contents of Private Equity Spotlight are the Copyright of Preqin Ltd. No part of this publication or any information contained in it may be copied, transmitted by any electronic means, or stored in any electronic or other data storage medium, or printed or published in any document, report or publication, without the express prior written approval of Preqin Ltd. The information presented in Private Equity Spotlight is for information purposes only and does not constitute and should not be construed as a solicitation or other offer, or recommendation to acquire or dispose of any investment or to engage in any other transaction, or as advice of any nature whatsoever. If the reader seeks advice rather than information then he should seek an independent ﬁ nancial advisor and hereby agrees that he will not hold Preqin Ltd. responsible in law or equity for any decisions of whatever nature the reader makes or refrains from making following its use of Private Equity Spotlight.

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