Global Private Markets Update

GLOBAL PRIVATE MARKETS UPDATE Q3 2019 DATA FUNDRAISING INVESTMENT EXIT ACTIVITY Year-on-year (YoY) US Buyout = change in key private market metrics through US Venture = Q3 2019 European Buyout = Asia Pacific

The US buyout market maintained returned, mega deals have not, as strong momentum through the general partners (GPs) remain disciplined US BUYOUT third quarter, with fundraising and in the face of high purchase-price investment both up year-on-year multiples. Technology has accounted and exit activity stable relative to for the largest share of investment by 96% 2018. Fundraising seems set to value year-to-date, at 26%, led by deals IPO exit activity UP exceed 2017’s record levels given for Ultimate Software ($11 billion), Dun an attractive pipeline of funds. We & Bradstreet ($6.9 billion) and Ellie Mae expect purchase-price multiples to ($3.7 billion). remain high, but elevated volatility 48% Exit activity rose 5% year-on-year by should create buying opportunities Fundraising UP the end of Q3. Initial public offering for disciplined managers. Full-year (IPO) activity is set to record a five-year exit activity should come in overall at high, reaching $17 billion through three around the same level as in 2018, after quarters. Merger and acquisition (M&A) a strong Q3. volume more than doubled in Q3 to US buyout fundraising was up 48% $82 billion, up from just $31 billion at year-on-year in the first three quarters of the end of Q2. Secondary sales value 2019 to $169 billion, led by a number of remains in line with historical averages. larger funds. These funds accounted for However, this strength has been offset more than half of capital raised, by the weakest year – to this point – for with the average fund size exceeding dividend recaps since 2009. This likely $1.8 billion. Demand has been reflects managers’ preference for a supported by strong recent distributions, full path to exit in the current valuation which have outpaced capital calls, and environment, as well as a relatively an influx of new investors. prudent attitude to leverage given where we are in the economic cycle. Total investment value hit $166 billion through Q3. This is higher year-on-year, Sources: PitchBook, S&P, CapitalIQ, Buyouts Magazine, SEC, Thomson Reuters. As of September 30, 2019. but if the current pace is maintained across Q4, the annual total will be on par with 2018. While mega funds have

HARBOURVEST PARTNERS | DECEMBER 2019 p1 The US venture market remained US venture fund investment rose strong into the third quarter of 2019, 21% year-on-year to $78 billion by US VENTURE with fundraising, investment, and the end of the third quarter, outpacing exit activity keeping pace with 2018 fundraising. Emerging innovations, – a record-breaking year for venture. such as artificial intelligence, machine 21% Leading venture firms are coming learning, blockchain, and bioengineering Investment UP back to market with new funds, which have continued to drive new startup activity should, in conjunction with several activity. Expansion and later-stage platform extensions, help maintain investment activity has been particularly positive fundraising momentum strong. Growth financings continue to $487M across the full year. We expect be attractive alternatives to IPOs for UP large-scale investment to continue companies looking to stay private longer. IPO median for the remainder of 2019, especially post-offer at the expansion and later stages as At the end of the third quarter, exit value companies stay private longer. There valuations for both M&A and IPOs were were multiple high-profile venture- outpacing 2018 levels, though deal backed exits this year, including Uber, volume is stable. In regard to M&A, Lyft, Slack, Pinterest, and Qualtrics, the median deal size for 2019 has but the pipeline remains strong, which increased to $125 million. Strategic should support future exit activity. investors remain willing to pay premium prices for growth and enhancement to Fundraising by US venture funds rose product lines. On the IPO side, high- 35% year-on-year in the first three profile technology companies have quarters of 2019 to $41 billion. Recent received strong valuations at IPO, with liquidity generated by large, high-profile Uber leading at $76 billion. These exits exits has continued to drive limited have driven up the median post-money partner (LP) demand for venture funds, valuation to $487 million, up from with leading managers remaining $447 million in 2018. oversubscribed. Many have come back Sources: PitchBook, ThomsonOne. As of September 30, 2019. to market in 2019, with some launching dedicated stage- and sector-focused funds.

The European buyout market has 56% year-on-year, though we expect EUROPEAN been relatively strong in the year large fund closings (e.g. Apax X, Permira through Q3 2019, although it is overall VII) to improve this figure significantly BUYOUT weaker than last year. Fundraising in Q4. remains steady, but investment and exit activity moderated on a year-on- Investment volumes were down nearly 69% year basis. We still expect several 30% year-on-year in the first three quarters of 2019. However, while levels Fundraising for UP large fund closings (including funds from Permira and Apax Partners) to are below those in 2017 and 2018, they funds €1B-5B remain in line with historical averages. in size boost fundraising activity across the remainder of the year, and some large Relative weakness has been more deals should support investment pronounced at the upper end of the volumes. Exit activity is more market, although we expect several large 27% unpredictable but may remain on the Q4 deals to push these figures up (for DOWN weak side due to market volatility and example, EQT’s acquisition of Nestle’s M&A exit skincare division). volume political and economic uncertainty. Fundraising for European buyout funds As expected, exit activity was rather remained stable through Q3, down 6% subdued in Q3, likely due to market on a year-on-year basis. However, if this anxiety around Brexit and the trajectory pace is maintained through the end of of the global economy. M&A activity the year, 2019 will outstrip 2018. Funds declined 27% on a year-on-year basis to in the middle-market segment continue €39 billion through the first three quarters to fare well. Collectively, funds targeting of the year. This more than offset a slight between €500 million and €5 billion uptick in IPO activity, which hit €4 billion, accounted for €29 billion of the up from €3.6 billion in the same period €45 billion raised in the year to Q3, up in 2018. from €18 billion a year prior. Fundraising Source: Preqin. As of September 30, 2019. for larger funds (>€5 billion) was down

HARBOURVEST PARTNERS | DECEMBER 2019 p2 Asia Pacific private markets remained Investment continued to outpace healthy through the third quarter of fundraising through Q3, though it was ASIA PACIFIC 2019. Activity moderated on a year- down 19% year-on-year. As per our on-year basis, but this was primarily last update, large buyout transactions due to a very strong 2018, which continued to drive stronger investment $9B featured record highs for fundraising, activity in Australia and New Zealand, Year-to-date UP investment, and exit activity. Looking which rose more than 240% year-on- M&A exit activity at the data for the last few years the year to just over $15 billion. This was, in Japan continuing trend is one of growing however, more than offset by a 56% investor interest in the region. While year-on-year decline in China, a 37% fall US-China trade tensions are likely to in Japan, and a 36% drop in Southeast 19% impact regional currencies and public Asia. The sharp decline in China activity DOWN markets, we expect healthy GDP has been in part due to fewer large late- Regional growth and a possible loosening of stage technology financing rounds. investment economic policy in China to support activity private equity activity as we move Regional exit activity also moderated on into 2020. a year-on-year basis, again largely due to comparisons with a historically strong Fundraising was down 45% year-on-year 2018. At its current pace, this will be to $39 billion through the third quarter of the second strongest year recorded for 2019, led by a sharp decline in China- M&A exits in the Asia Pacific region, led focused and pan-regional funds. Despite by a surge in Japan (from $1.4 billion this decline, if the current fundraising in 2018 to $9 billion in 2019 year-to- pace is maintained through Q4, 2019 will date). However, macro and geopolitical be the second strongest year on record concerns have heightened public market in Asia. Top-performing managers’ volatility, contributing to ongoing subdued funds remain oversubscribed, the pace IPO activity. of fundraising processes is quickening, Sources: Asian Venture Capital Journal, Centre for Asia Private and spin-outs continue to create new Equity Research, Emerging Market Private Equity Association, opportunities. as of September 30, 2019.

This communication does not constitute an offer to sell or the solicitation of an offer to buy interests in the Fund or any other fund or investment product sponsored by HarbourVest, or investment services provided by, HarbourVest Partners L.P. or its affiliates. Such an offer may be made only to qualified investors by means of delivery of a confidential Private Placement Memorandum or similar materials that contain a description of the material terms of such investment. No sale will be made in any jurisdiction in which the offer, solicitation, or sale is not authorized or to any person to whom it is unlawful to make the offer, solicitation or sale. Offers and sales of interests in the Fund may not be registered under the laws of any jurisdiction. The information in this document is highly confidential and must not be shared with third parties without HarbourVest’s permission. The general partners, companies, funds shown above are intended for illustrative purposes only. While these may be an actual investment or relationship in a HarbourVest portfolio, there is no guarantee they will be in a future portfolio. Past performance is not a reliable indicator of future results. For additional legal and regulatory information please refer to www.harbourvest.com/important-legal-disclosures.

HarbourVest is an independent, global private markets investment specialist with over 35 years of experience and more than $63 billion in assets under management, as of September 30, 2019. The Firm’s powerful global platform offers clients investment opportunities through primary fund investments, secondary investments, and direct co-investments in commingled funds or separately managed accounts. HarbourVest has more than 500 employees, including more than 125 investment professionals across Asia, Europe, and the Americas. This global team has committed more than $39 billion to newly-formed funds, completed over $22 billion in secondary purchases, and invested over $14 billion directly in operating companies. Partnering with HarbourVest, clients have access to customized solutions, longstanding relationships, actionable insights, and proven results.

HARBOURVEST PARTNERS | DECEMBER 2019 p3