Wednesday July 20, 2016

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FountainVest Seeks $1.75B for China Pool QUOTED BY AINSLIE CHANDLER, BLOOMBERG BRIEFS FountainVest Partners Co., the firm founded by four former Temasek Holdings "It's very clear to me that senior executives, has set a $1.75 billion target for its latest China fund, according to money is going to out two people with knowledge of the fundraising. of Europe and into the U.S." The firm has set a $2.1 billion cap on the fund and recently held a first close on about — KKR's Henry McVey, speaking on $1.7 billion, one of the people said. Bloomberg TV on July 14 The Hong Kong, Shanghai and Beijing-based fund manager invests in sectors linked to buying habits of China's growing middle class, including health care, media and WEEK IN NUMBERS lifestyle companies, according to its website. If the cap is reached, the new fund would be more than 55 percent bigger than its 7.25% — New Hampshire predecessor, FountainVest China Growth Capital Fund II LP. Retirement System's new, lower The bigger fund comes despite a marked slow down in the Chinese economy in assumed rate of return recent years. FountainVest did not respond to requests for comment. The previous fund closed in November 2012 with $1.35 billion in commitments, 150M Euros — Amount Eiffel according to data compiled by Bloomberg. That fund had a net internal rate of return of Investment Group is trying to gather 48.5 percent and a 1.8 times multiple of invested capital at Dec. 31, according to data for renewable energy investments from investor Washington State Retirement System. That puts it in the top quartile among peer funds, according to the data compiled by Bloomberg. MEETING TO WATCH Other investors in the 2012 fund include Ontario Teachers' Pension Plan Board and Temasek Holdings Pte. Ltd. , according to the Bloomberg data. The Illinois Municipal Retirement FountainVest in August 2014 bought a stake in automotive components company Key Fund's investment committee is Safety Systems. The firm is a part-owner of Hong Kong-listed Imax China Holding Inc. expected to hear presentations from The firm, founded in 2007, is led by Chief Executive Frank Tang, who was previously the managers of three real estate a senior managing director and head of China investments at the Singapore state funds, then consider committing to investor Temasek. FountainVest managing directors Terry Hu, George Chuang and them, at its July 21 meeting. Chenning Zhao were all managing directors at Temasek, according to FountainVest's website. IN THIS ISSUE

FUNDRAISING. Aldrich Capital Venture Fundraising Has Surged in 2016 Partners is trying to raise $250 million for its first fund. Stafford Capital Partners is gathering a fund for secondary infrastructure fund stakes.

REGULATION. The European Union's investment regulator said some overseas alternative funds should qualify for the right to operate across the trade bloc.

Q&A. H.I.G. Capital and Milan-based Idea Capital Funds have set up a vehicle to take Italian banks' non- performing loans and invest new money to help turn around the businesses. Giuseppe Mirante, managing director of H.I.G.'s Bayside distressed investing unit, explained fundraising has rallied in 2016, with $34.8 billion of closings to July 19, the rationale for the fund and how it compared to $24.1 billion during the same period in 2015, according to data compiled by will work. Bloomberg. — Ainslie Chandler, Bloomberg Briefs

FROM THE MINUTES COMPILED BY AINSLIE CHANDLER, BLOOMBERG BRIEFS July 20, 2016 Bloomberg Brief Private Equity 2

FROM THE MINUTES COMPILED BY AINSLIE CHANDLER, BLOOMBERG BRIEFS

Illinois Considers Real Estate Managers; IFC Looks at Latin America Venture Capital Buenos Aires-based Nibulez SA is raising an early-stage venture capital Calpers Executes on Real Estate Fund Sales fund and an accelerator fund, according California Public Employees Retirement System has sold its stake in LaSalle to a document from a potential investor. French Fund II LP to Blackstone Group's Strategic Partners Real Estate Special World Bank Group's International Opportunities I LP, according to a July 7 regulatory filing in the U.K. Finance Corp. is considering investing Calpers announced in December it had sold $3 billion worth of interests in 43 up to $3 million in the accelerator, Certo different funds to Strategic Partners but did not disclose which funds. The sales are SA (trading as NXTP Labs), which has a part of Calpers' plan to cull the number of managers in its portfolio from 200 to about $38.5 million target, according to an IFC 100 by 2020, the pension said at the time. document. IFC is also considering Since November, it has also sold to Strategic Partners its stake in LaSalle Asia committing $17 million to NXTP Fund 2 Opportunity Fund II LP, Niam Nordic Fund IV LP, European Property Investors LP LP, which has a $120 million target, and and Harbert European Real Estate Fund II LP, according to separate regulatory $10 million in a related co-investment filings. The Strategic Partners secondary fund held a first close on about $614.7 vehicle. The lab will aim to support 300 million in October 2015, according to a regulatory filing in the U.S. high-growth technology startups across Click here for the U.K. filings and here for the U.S. filing Latin America and the fund will make — Ainslie Chandler, Bloomberg Briefs venture investments in high-growth technology companies in the same Nebraska Investment Council was Municipal Employees' Retirement region, according to the IFC document. due to discuss an asset liability study System of Michigan's board is due to >Click here for report. from adviser Aon Hewitt at its July 19 discuss its asset allocation and its 2017- and 20 education retreat, according to 20 strategic plan at its July 20 meeting, the agenda. The council is also due to according to the agenda. International Finance Corp. is also discuss a review of its investment considering a $1 million investment in > Click here for agenda consultant and legal counsel and to hear Capria Accelerator Fund, a venture presentations on fixed income investing capital fund formed to invest in early- City of Fresno Retirement Systems in the current economy. stage local fund managers in Sub- retained Oaktree Capital Management Saharan Africa, South and Southeast > Click here for agenda. and PCCP LLC as their value add and Asia and Latin America. Capria Ventures opportunistic real estate managers, LLC is trying to gather $5 million for the At its board planning session on July according to minutes from the pension's fund. 19, Washington State Investment June 28 meeting. The pension adopted a > Click here for report Board was slated to receive education 1.2 percent or $30 million allocation to on evaluating private equity funds with the asset class. different track records and fee structures, The Fresno pension also agreed to San Diego County Employees private equity incentives and partnership terminate its investment in the PIMCO Retirement Association has chosen dynamics and what happens when an Unconstrained Bond Fund and eventually Aon Hewitt Investment Consulting as its investment doesn't go as planned. The redirect the money to the manager's general consultant, according to a report board was also due to discuss its real Pimco Corporate Opportunities Fund II to the pension's board from chief estate, private equity and tangible assets and Pimco Bravo Fund III LP, according investment officer Stephen Sexauer, plans. to the minutes. taking over from BNY Mellon and Verus. > Click here for agenda. > Click here for the minutes. > Click here for letter

New Hampshire Retirement System Illinois Municipal Retirement Fund's Louisiana State Employees' has cut its assumed rate of return from investment committee is expected to Retirement System's investment 7.75 percent to 7.25 percent, according hear presentations from the managers of committee is expected to receive to minutes from its June 14 meeting. The CBRE Strategic Partners U.S. Value 8 education regarding emerging markets pension had $7.3 billion in funds held in LP, AEW Partners VIII LP and Long private equity at its July 21 meeting and trust at April 30, up 1 percent for the Wharf Real Estate Partners V LP at its to discuss emerging markets mandate month but down 2 percent for the fiscal July 21 meeting, then approve search books, according to the meeting year to that date. allocations to those funds, according to agenda. > Click here for report. the meeting agenda. The committee is > Click here for agenda. also due to receive its annual private equity performance presentation for 2015. > Click here for the agenda

FUNDRAISING July 20, 2016 Bloomberg Brief Private Equity 3

FUNDRAISING

Stafford Aims for $275M for Infrastructure Fund Stakes Eiffel Eyes 150M Euros Stafford Capital Partners is trying to gather as much as 250 million euros ($275 For Renewables million) for a fund to buy secondhand stakes in existing infrastructure funds, according to a person with knowledge of the fundraising. Eiffel Investment Group is trying The firm started fundraising in March or April and has held a first close on 94.5 million to raise 150 million euros ($166 euros for Stafford Infrastructure Secondaries Fund II LP, the person said. million) for a fund to invest in small Since that first close, the firm has invested 20 million euros in a portfolio of more than renewable energy and energy 90 assets, according to an update on Stafford's website. A separate co-investment efficiency projects, according to vehicle, Stafford Infrastructure Co-Investment I, helped with the purchase, according to documents from the European the website. Investment Bank. London-based Stafford raised 60 million euros for its first infrastructure secondaries The EIB is considering a 50 million fund, the person said. That fund was initially being raised as part of the Macquarie euro in the Eiffel Energy Transition Group. Stafford bought $700 million in specialty funds from Macquarie Investment Fund, which will invest primarily in Services Ltd and Macquarie Investment Management Ltd in June 2014, according to a France, according to a report on the statement from the time. bank's website. Stafford, which also invests in private equity, timberland and agriculture, has about The fund will provide short-term $4.3 billion in assets under management and advice, according to its website. financing to onshore wind, solar Stafford investment manager Craig White declined to comment on the fundraising. photovoltaic and energy efficiency — Ainslie Chandler, Bloomberg Briefs projects or development companies. — Ainslie Chandler, Bloomberg Briefs Aldrich Raising Debut Fund for Growth Investments Farallon Joins Asian Aldrich Capital Partners LLC is trying to gather as much as $250 million for its first fund, according to a person with knowledge of the fundraising. Private Credit Rush Aldrich, a mid-market firm, was formed in 2014 by Mirza Baig, an entrepreneur who Private debt financing in Asia is previously served as the chief financial officer of AOL Time Warner's e-commerce unit, expanding amid a pullback in bank and Raheel Zia, who was previously a managing director in the Principal Investment lending, with Farallon Capital Area of Goldman Sachs & Co. Management LLC raising money for The Bethesda, Maryland-based firm, which also has an office in and Hyderabad, another fund part-focused on the India, invests in U.S. companies with $10 million or more in revenue, in the financial region. technology, health-care information technology and application software, according to The -based its website. investment firm said last week it Aldrich has already made several growth investments, using capital from the firm, raised $1.12 billion for its third fund affiliates and institutional investors, according to another person with knowledge of the focusing on private investments in matter. Asia and Latin America. That comes In March 2015 Aldrich invested in a $15 million Series B financing of PhishMe Inc., a as BlackRock Inc. and OCP Asia provider of computer threat management technology, according to a statement from (Hong Kong) Ltd. are building up PhishMe from that time. private credit units in the region with It invested in Lavu Inc., a provider of mobile point of sale systems, in June 2015, new hires, as banks rein in lending according to a statement from that time. amid tighter capital and liquidity Aldrich did not respond to requests for comment. requirements. — Ainslie Chandler, Bloomberg Briefs Private debt funds focused on Asia raised a record $5.5 billion of fresh Perry Alumnus Said to Seek $1.3 Billion for Distress capital from investors in 2015, a year in which money managers that buy Asia Research & Capital Management, started by Perry Capital’s former Asia head private debt pulled in $85 billion Alp Ercil, has raised $1.3 billion for its third fund, which invests in distressed assets worldwide, the most since 2008, globally with a focus on Asia, said a person with knowledge of the matter. according to data provider Preqin. Ercil’s Hong Kong-based company completed capital raising for the ARCM Master — David Yong and Denise Wee, Fund III last week, said the person, who asked not to be identified because the Bloomberg News information is private. The new five-year pool, its largest, will primarily invest in publicly traded and private credit, the person added. Yusuf Haque, ARCM’s head of business Click here for the full story on terminal development, declined to comment on the fundraising. Distressed-debt funds are raising capital to snap up assets amid an uneven global economic recovery and a commodity price slump. Investors such as George Soros are predicting that the U.K.’s decision to exit the European Union will unleash a crisis in the financial markets. — Bei Hu, Bloomberg News

PRIVATE EQUITY AND VENTURE CAPITAL NEWS ROUNDUP July 20, 2016 Bloomberg Brief Private Equity 4

PRIVATE EQUITY AND VENTURE CAPITAL NEWS ROUNDUP

Evercore Transfers PE Unit next CEO on July 14, said in a telephone continues to lag compared to recent conference with reporters. “This could be years. to Managers a low-rate environment for a period of Click here for the full story on terminal Evercore Partners Inc., the investment time and we have to factor that in when bank founded by Roger Altman, is we do our allocation work.” planning to transfer control of a private Click here for full story on the web Ethos Capital to Sell Stock equity business in Mexico to its principals. in Placement for Listing The team, led by Alfredo Castellanos, Michigan Endowment Adds EPE Capital Partners intends to raise created an entity called Glisco Partners as much as 2 billion rand ($139 million) to take on responsibility for the Evercore to Bets on Private Equity in a stock placement and Johannesburg Mexico Capital Partners funds, which The University of Michigan's $10 listing that will allow shareholders to manage $266 million of invested capital, billion endowment added to its invest in a portfolio run by sub-Saharan the New York-based investment bank investments in venture capital, private Africa’s largest private equity firm. said Wednesday in a statement. Pedro equity and real estate as it struggles to Ethos Capital, as the listing entity is Aspe, the chairman of Evercore’s Mexico recover from losses. known, will sell as many as 200 million business, will stay on the investment Michigan invested $177 million in shares to selected investors and committee for the funds. commitments mostly to the private funds, institutions, it said in a statement Evercore is mainly known for providing with $45 million going to two energy Monday. Ethos Capital will invest in advice on transactions such astakeovers pools, according to the Board of Regents unlisted holdings in small and medium- and restructurings. Blackstone Group LP agenda for its meeting Thursday. The size companies managed by Ethos Chief Executive Steve Schwarzman said marketable securities portfolio, which Private Equity. last year when he separated PJT makes up 58 percent of the endowment, Click here for full story on terminal Partners Inc. from the private-equity giant lost 2.7 percent in the fiscal year through that advisory firms can more easily May 31. attract clients when they’re independent. Click here for the full story on terminal Colony's Tom Barrack The Mexico transaction “represents Defends Trump on Trade another step forward in our strategy of continuing to invest in our independent, More Funding Needed for The business community hasn't exactly unconflicted Startups, VCs Say unified behind Donald Trump. Many businesses while positioning our corporate honchos who normally support investment management affiliates to Congress must take steps to broaden Republican candidates are alarmed at continue to grow,” Evercore CEO Ralph access to capital markets for startups his economic plans, which include Schlosstein said in the statement. and emerging growth companies, scrapping trade agreements and Click here for full story on the web including re-energizing initial public punishing companies that shift jobs offerings, venture capitalists told abroad. Even before Trump finished lawmakers July 14. delivering a major speech on trade policy New Calpers CEO Sees Joseph Schocken, president and in Pennsylvania last month, the U.S. Potential Boost in PE, RE founder of Broadmark Capital LLC, told Chamber of Commerce was targeting the Senate Committee on Small him with a torrent of criticism on social The new chief executive officer of the Business and Entrepreneurship that the media. California Public Employees’ U.S. must address the lack of regional All of this has Trump's friends and Retirement System said the largest U.S. banks that back many startups and allies in the business world rushing to pension fund may look to add more finance their efforts to sell shares publicly. explain their candidate, and themselves. investments in private equity and real Small IPOs of $25 million “would be On Monday, Thomas Barrack, a globe- estate to increase returns and close its what's needed” for many small trotting billionaire real-estate investor in unfunded liability. companies around the country, not the Los Angeles who describes Trump as a “When you’re looking at the low rate of $100 million or more that dominate the "close friend," is publishing his own 12- return environment in the public markets, market, Schocken said at a committee page treatise on the economy. It doesn't I don’t think you can ignore private hearing. mention Trump, but it's a kind of defense equity,” Marcie Frost, named the The number of large and small U.S. of Trump's critique of international trade. pension fund’s companies debuting stock to the public Click here for the full story on the web

REGULATION July 20, 2016 Bloomberg Brief Private Equity 5

REGULATION

EU Regulator Backs Overseas-Fund Access in Brexit Boost for U.K. The European Union’s investment will let the U.K.’s 700-billion-pound ($922 Kongand Singapore, while noting that regulator said some overseas alternative billion) alternative investment industry there are discrepancies in how funds should qualify for the right to operate across the bloc once the country accessible funds are for investors in operate across the trade bloc, creating a leaves the grouping. About 85 percent of different European countries. It also said potential opening for U.K. managers Europe’s hedge-fund assets are Australian firms should get passports, worried about losing access after Brexit. managed out of London, making it the provided the nation standardized its There are “no significant obstacles” second-largest center worldwide after treatment of European funds. The preventing hedge funds and private New York, according to estimates from regulator didn’t give an opinion on the equity firms based in Canada, Guernsey, industry group TheCityUK. Isle of Man because the island doesn’t Japan, Jersey and Switzerland gaining Under the Alternative Investment Fund have a investment regime comparable to so-called passports under a directive due Managers Directive, non-EU funds may the EU directive. to come into force in 2018, the European be able to get a single passport that will The Alternative Investment Securities and Markets Authority said in let them sell products in every EU Management Association, whose a statement. The Paris-based regulator country. Whether a fund qualifies will members manage more than $1.5 trillion, also backed passports for some types of largely depend upon the regulations in said it it welcomed the ruling and that it U.S. funds. It delayed opinions on force in its home market. The European was optimistic that regulators in the U.S., Bermuda and the Cayman Islands, Commission will consider the ESMA’s Hong Kong, Singapore and Australia pending new rules in these nations. recommendation when it draws up would quickly be able to resolve the Hedge fund lawyers have highlighted legislation to implement the directive. issues highlighted in the report. the ESMA report as a key indicator in The ESMA generally backed awarding — Luca Casiraghi and Silla Brush, Bloomberg determining whether European regulators passports to firms based in Hong News

COMINGS & GOINGS July 20, 2016 Bloomberg Brief Private Equity 6

COMINGS & GOINGS

VC Joins Blackstone Board; Cathrin Petty Moves to CVC Blackstone Group LP said venture pharmaceutical, biotechnology and John Anderson, who with Ric Kayne capitalist Jim Breyer joined the health-care companies in Europe have started the firm in 1984, died in 2011. alternative-asset manager’s board of risen to $22.1 billion so far this year, an The proposed merger with publicly directors. The addition expands New 82 percent increase from a year earlier, traded Ares, announced in July 2015, fell York-based Blackstone’s board to 12 according to data compiled by apart three months later as the slump in members.The group includes five internal Bloomberg. Petty worked on PAI energy prices exposed a rift between the directors — Steve Schwarzman, Tony Partners SAS’s agreement to buy Atos firms as to how to manage investments. James, Tom Hill, Jon Gray and Bennett Medical in May as well as Spire “We have strengthened our executive Goodman — as well as Richard Jenrette, Healthcare Group’s initial public offering, leadership team, provided for continuity in Shelly Lazarus, Jay Light, Brian CVC said in the statement. management for the next generation and Mulroney, William Parrett, Peter Grauer Petty, who has more than two decades ensured my intent for Kayne to remain a and Breyer. Breyer, 54, is best known for of experience in the industry, was also private, independent firm for the long being one of Inc.’s earliest previously a special partner at U.K. term,” Ric Kayne said in the statement. backers while at Partners. In 2006 private equity firm Vitruvian Partners LLP — Devin Banerjee, Bloomberg News he formed Breyer Capital, a venture and a partner at Apax Partners LLP. capital and private equity firm that invests — Sarah Syed, Bloomberg News MVision Private Equity Advisors has in the U.S. and China. He’s a director at hired Loren A. as a senior Inc. and has served on Kayne Anderson Capital Advisors, managing director, according to a the boards of Facebook, Marvel the alternative-asset manager that last statement from the firm. Boston was Entertainment LLC, Inc., Inc. year canceled a merger with Ares previously President and Chief Operating and Wal-Mart Stores Inc., among others. Management LP, named Mike Levitt as Officer of Hycroft LLC, an investment Grauer, who joined the company’s chief executive officer. bank, and he was previously global head board earlier this year, is chairman of Levitt, who became a senior credit of origination for Merrill Lynch's Private Bloomberg LP, the parent of Bloomberg executive at Apollo Global Management Equity Funds Group and head of the News. LLC in 2012 when it acquired his firm private equity fund group at Citigroup — Devin Banerjee, Bloomberg News Stone Tower Capital, will start Global Markets. immediately and be based in Kayne — Ainslie Chandler, Bloomberg Briefs Private equity firm CVC Capital Anderson’s Los Angeles headquarters, Partners hired Cathrin Petty from according to a statement Thursday. Garrett T. Charon, a former partner at JPMorgan Chase & Co. to run its Kayne Anderson, which manages Weil, Gotshal & Manges in New York, European health-care operations. about $22.5 billion in energy, has joined Ropes & Gray as a partner in Petty, who was previously head of infrastructure, credit and private equity its private equity practice, according to a health care for JPMorgan in Europe, the assets, also said it elevated Bob Sinnott statement from the firm. Charon is the Middle East and Africa, will join as a to co-chairman alongside co-founder Ric second former Weil. Gotshal & Manges partner based in CVC’s London office, Kayne. Sinnott was previously the firm’s partner to join the firm in recent months. the company said in an e-mailed CEO and president. David . Bittner joined Ropes & Gray's statement. The moves bolster Kayne Anderson’s private equity practice in April. executive ranks as many private equity She’s joining the buyout firm at an — Ainslie Chandler, Bloomberg Briefs active time for the sector. Acquisitions of firms prepare for generational succession.

VERBATIM July 20, 2016 Bloomberg Brief Private Equity 7

VERBATIM

Currency Movement, Japanese LPs Discussed at Asian PE and VC Conference together takes a lot of work. Personally record performance, cohesive teams. We Private equity and venture capital investors and for me, I work longer hours than when I are seeing a lot of new teams trying to managers gathered at New York's Harvard Club was in the States, which I always find raise capital in the region and I expect on July 13 for the AVCJ Private Equity & Venture surprising. It's very hard work." this to continue. The demographics in Capital Forum - USA 2016. Here are some Southeast Asia are so attractive. If you highlights from panels on investing in Japan and — David Do, managing partner, at Vietnam- look at the EMPEA 2016 LP survey, Southeast Asia. based VI Group, discussing the private equity South East Asia is the most attractive sector in Southeast Asia. markets for GPs to invest in over the next 12 months." "Having done this business for 17 "They are not giving any favors to years, the only year that the mark-to- Japan in the domestic market, they are — Adam McConagha, Director, Private Equity, market value of our assets has moved looking at it as a global asset. They are Investment Funds Department, Overseas Private more than two percent up or down, in going out and working with the global Investment Corp., speaking on a panel about aggregate, was last year. And we got advisers and the global firms to investing in Southeast Asia. whacked. Hard. That's an unrealized understand what the benchmarks are diminution of value, but that was all and to create a portfolio of private equity "A lot of the traditional banks have around local currency movements." that will enhance their returns. And more gotten out of this business. The Volcker often than not, the first place they Rule, the Basel III regulations, all of the — Rodney Muse, Managing Partner, Navis allocate is the North American buyouts U.S. banks almost entirely have got out Capital Partners, discussing currency hedging on and European buyouts." of this direct lending. They do a little bit a panel about Southeast Asia. but it's very focused. And the European — Richard Folsom, representative partner at banks have so many balance sheet "Building up both the investment and Japan-based Advantage Partners, discussing the problems and risk weighting issues that the post-investment side takes a lot of wave of Japanese limited partners investing in they no longer do this. So it's a very work, so I don't think we are in danger of private equity. welcome, open conversation for having a lot more sustainable GPs. companies." There will be a lot of groups that try. If "There's a lot of groups out there in anything, South East Asia is a bit over- South East Asia trying to raise capital, — John Redick, Olympus Capital Asia Credit, intermediated on the sell side and the claiming to be pan-ASEAN funds. I think discussing the opportunities for credit funds in buy side is easy. But to pull everything there are only a limited number of really Southeast Asia. good fund managers who have track

Q&A July 20, 2016 Bloomberg Brief Private Equity 8

Q&A Italian Government Reforms Open Up Distressed Opportunities, Says H.I.G.'s Mirante Q: Why now? Q: What's your strategy? Miami-based H.I.G. Capital and Milan-based A: After years of half-hearted attempts, A: We require long-term capital, Idea Capital Funds have set up a new vehicle to the political, financial and entrepreneurial significant local presence, a private take Italian banks' non-performing loans and establishments have finally started equity investing mindset and experienced invest new money to help turn around the working together to make change investment managers who can bring in a businesses. It will acquire debt of small and mid- possible. In other European countries, the skill set that can focus on relatively small sized businesses from banks including Banca financial crisis hit harder and a solution to investment situations, often with Monte dei Paschi di Siena and Banca Popolare di NPLs developed earlier. In Spain, for challenging and limited access to Vicenza. The banks will retain a stake in the 260 example, the government pushed for the financial and legal information. million-euro ($288 million) Idea CCR fund and will creation of a bad bank to deal with bad therefore participate in recoveries.Giuseppe debts back in 2012. In Italy, the post- Q: How will the new fund operate? Mirante, managing director of H.I.G.'s Bayside Lehman crisis has been less severe, but A: Idea CCR is a turnaround credit fund. distressed investing unit, explained the rationale the recovery also much less pronounced. H.I.G. Bayside teamed up with Idea for the fund and how it will work. He spoke with Real estate was the main issue in Spain Capital, which, being part of a larger Luca Casiraghi of Bloomberg News on July 8. and elsewhere. Relatively speaking, it's family-backed group, has a deep more the corporate sector at the heart of understanding of the Italian market, the Italian NPL problem. strong local relationships and managerial Q: Why the focus on Italy? know-how. H.I.G. Bayside contributes its A: The business climate in Italy has been Q: What's your view of Italian banks? experience in international distressed challenging for quite some time and A: Since 2008, we have seen and special situations credit, while H.I. distressed debt has been piling up on the international banks downsizing their G.'s 12-person strong Italian team based banks’ balance sheets. The banking activity in Italy and selling out of in Milan provides additional private equity sector is now saddled with more than leveraged loans. In comparison, Italian expertise and on-the-ground support. 360 billion euros of non-performing lenders have found it rather difficult to The Idea CCR fund will initially manage a loans. Red tape is omnipresent and the sell bad Italian corporate loans, portfolio of eight loans to distressed judicial system, especially with regards to especially those to smaller companies. companies, which have been transferred insolvency law and creditor protection, is They thought that the economy would by seven banks, and will provide new in dire need of modernization. However, recover and their loans with it, so banks money to help restructure and relaunch there are a lot of Italian SMEs that are amended and extended bad loans the underlying businesses. The fund has really good at what they do and which waiting for better times that never came. had a first close of 260 million euros and represent the backbone of the Italian Now, banks have accepted that they can be scaled up on a go-forward basis. economy. They are hidden champions, need to do something about this as their The fund is designed to simultaneously nimble exporters and mini-multinationals own existence is at risk. The government assist participating banks with the in traditional sectors with great potential is trying to help by attempting to break management of their corporate for growth; but for a variety of reasons, the corset that inhibits debt sales through distressed debt exposure and provide they have become overleveraged or the reform of bankruptcy and other SMEs with capital for turnaround and even distressed. It is worth rescuing and relevant laws. This is opening up growth. financing precisely these SMEs. opportunities for distressed debt investors. Q: Where's the opportunity? A: Small and medium-sized companies, roughly defined by 50 to 500 million euros of revenues. We like traditional private equity sectors such as industrial Current Role: Managing director at H.I.G. Bayside, the distressed debt manufacturing, automotive, construction and special situations affiliate of H.I.G. Capital, since March 2016. materials, consumer goods, chemicals Member of the Idea CCR investment committee, which is led by and packaging, as opposed to heavily Francesco Gori, former CEO of Pirelli Tyre regulated sectors. They are often family- Career: Head of distressed and loan research at BNP Paribas in London owned and have traditionally relied on (2011-2016); head of investment origination and advisory at Serone regional banks, which struggled post- Capital Management (2010-2011); managing director at Cyrus Capital 2008. Entrepreneurs have often been Partners (2007-2008); senior analyst at Trafalgar Asset Management unable to get access to new money to (2003-2005) help them turn around or grow their Languages: German, Italian, Spanish, French businesses when they needed it, putting Education: MBA, Columbia University more pressure on existing bank loans.

FEATURE July 20, 2016 Bloomberg Brief Private Equity 9

FEATURE

Chinese Venture Fundraising at Three-Year Low as Startups Hurt BY LULU YILUN CHEN, BLOOMBERG Fundraising at Lowest Level Since Late 2013 NEWS The party isn’t quite over for China’s technology startups, but the dance floor’s thinning out. Judging by the cash that investors are preparing to deploy, the euphoria that catapulted the country’s startup financing to a record 2015 may be starting to wane. Venture-capital fundraising by Chinese firms dropped to just $400 million in the second quarter, its lowest in almost three years, according to London consultancy Preqin Ltd. The number of deals done involving Chinese companies fell 12 percent. Years of red-hot economic growth and the emergence of a private entrepreneurial class created some of the biggest names in technology, from ride-hailing service Didi Chuxing to the company behind DJI drones. But startups to Bloomberg News about the report. depreciating yuan and rising levels of hoping to follow in their footsteps are To be sure, no one’s predicting the bad loans held by Chinese banks,” he hurting as the economy sputters: spigot will dry up overnight. Just this said. Goldman Sachs Group Inc. estimates the month, IDG Capital Partners and Silicon The years-long boom in marquee jobless rate will climb to 6.5 percent this Valley outfit Breyer Capital raised a $1 investments in leaders such as Didi and year. Prominent investors, including billion fund, though they stressed their Ant Financial however leaves smaller China eCapital Corp. founder Wang long-term horizon. The Chinese operators facing a squeeze, with industry Ran, warn of leaner times ahead in viral government is now angling to become a executives and investors fearing a posts. And the investors that once major technology investor in its own right, looming shakeout particularly in "O2O" or chased the latest Chinese internet fads backed by public pensions. on-demand services, as copycat apps lay are growing cautious as valuations rise. But the tide may be turning. Chinese- on the subsidies to attract users to “We’re seeing some distress for based VCs raised $1.3 billion in the first everything from manicures and grocery startups especially among the smaller, two quarters, about half that of the same deliveries to online financing. younger unicorns,” said Jarod Ji, an period in 2015 and close to a fifth of year The worst is yet to come, Wang added. analyst at Zero2IPO, an influential before, according to Preqin. In the June The country’s stock market watchdog is Beijing-based research firm that tracks quarter, they managed to scare up $400 tightening rules governing one of the the VC and private-equity industries. million — down two-thirds from a year more popular get-rich-quick investor “Most of these companies aren’t earlier. schemes in recent memory, namely U.S.- profitable, and investors are getting Entrepreneurs must brace for a “sea listed companies delisting in order to go increasingly wary of their burn rates.” change” as the economy embarks on a public back home in China at much loftier In some ways, China’s catching up to downward spiral, boutique investment valuations. That clampdown means the rest of the world. Erstwhile high-fliers bank eCapital’s founder Wang wrote in a investors who borrowed to bet on like Jawbone Inc. and WeWork Cos. are column. Be prepared to reassess assets, potential delistings will need to unload laying off staff. Flipkart Ltd. and rewrite valuations, slash costs, cut their shares, further depressing Snapchat Inc. have seen their valuations people and — above all else — clinch valuations, he wrote. lowered. funding immediately, he wrote in the For now, the pain should be confined The situation in China is less clear, but influential business magazine Caixin. mostly to smaller startups. China’s home analysts like Ji point to how reports about “I urge every investor and entrepreneur to the largest herd of unicorns or billion- austerity measures have begun to make to contemplate one question this dollar startups outside of the U.S., with at the rounds. Chinese grocery deliverer summer: what can you do to survive and least 79 private companies worth more Beequick for instance plans to slash even thrive if, over the next five to 10 than $1 billion, according to Shanghai- about 30 percent of its employees, the years, you face an environment marked based IResearch. The U.S. in China Business Journal reported in July. by low growth rates, negative yields, a comparison has about 96, according to A representative for the Sequoia Capital- CB Insights. backed company declined to comment

AROUND THE WORLD IN SEVEN DAYS PRIVATE EQUITY DEAL NEWS July 20, 2016 Bloomberg Brief Private Equity 10

AROUND THE WORLD IN SEVEN DAYS PRIVATE EQUITY DEAL NEWS

Blackstone, Vista Mull IPOs for Portfolio Companies; KKR, Aion Eye Indian Steel

WHERE THE MONEY GOES COMPILED BY ERIN ZLOMEK, BLOOMBERG NEWS July 20, 2016 Bloomberg Brief Private Equity 11

WHERE THE MONEY GOES COMPILED BY ERIN ZLOMEK, BLOOMBERG NEWS

Significant venture capital investments of the past week.

Oriza Seed Venture DFJ Growth led a $181 Sequoia Capital led a $70 Capital (Oriza Seed), Boyu million series C round in million series C round in Capital and WuXi Unity Technologies, a Beijing-based cloud- Healthcare Ventures development platform for communication service provider (WXHV) participated in a creating 2D, 3D, virtual and augmented Yuntongxun.com (Beijing Yung Autopass $150 million series A round for CStone reality games and experiences. Pokemon Information Technology Co. Ltd.). The Pharmaceuticals, a biotech company Go was created using the platform. company sees using the proceeds to focused on the needs of Chinese China Investment Corp., FreeS Fund, improve its product and expand services. patients. The company also named Thrive Capital, Max Levchin, Sequoia TBP Capital also participated. The Frank Jiang CEO. Capital and WestSummit Capital also company claims to have served more participated. DFJ’s Barry Schuler will join than 50,000 companies including the company's board. Alibaba, , JD.com and . KKR led a $65 million (China Money Network) round in U.K. cybersecurity firm Beijing Phoenix Wealth

Darktrace. Summit Holding Group and Stripes Group led a Partners, TenEleven Hangzhou Liaison $81.59 million round for Ventures and SoftBank Interactive Information Mumbai-based Bigtree also participated. The round gives the Technology invested $449 million in Entertainment, a company company a valuation of more than $400 Beijing-based installment payment e- that owns an million, according to TechCrunch. commerce company Qufenqi, which entertainment and ticketing portal called plans to change its name to Qudian. The BookMyShow. Network 18, Accel company claims to have more than 20 Partners and SAIF Partners also SR One, Ltd, the million cumulative users. (China Money participated. The round values the corporate venture capital Network) company at over Rs 3,000 crore. (The arm of GlaxoSmithKline, Economic Times) joined a $51 million series B round for Second

Genome. The company focuses on Sources: Bloomberg News except where developing drugs targeting proteins, noted in parentheses. peptides and metabolites generated by the gut’s microbiome. (BioSpace)

Bloomberg Brief: Private Equity

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COMMITMENTS AND LAUNCHES July 20, 2016 Bloomberg Brief Private Equity 12

COMMITMENTS AND LAUNCHES

Recently Disclosed LP Commitments

COMMITMENT TARGET LIMITED PARTNER FUND REGION STRATEGY CURRENCY (ORIGINAL (ORIGINAL CURRENCY) CURRENCY) Texas County & District Retirement System Marlin Heritage Europe LP Any Buyout EUR 56 200 Connection Capital LLP DN Capital Global Venture Capital IV LP Any Venture EUR 2 200 Hongyu Wear-Resistant New Materials Co Ltd Hong Yuan New Material Buyout Fund LP Asia Pacific Emerging Buyout CNY 70 1,000 El Paso Firemen & Policemen's Pension Fund Gamut Investment Fund I LP North America Buyout USD 9 750 Source: Bloomberg Private Equity Compiled from public disclosures by limited partners. Includes commitments that were scheduled for approval but are not yet approved or whose approval has not been confirmed. All figures in millions.

Recently Launched/Premarketing

TARGET FUND STRATEGY REGION CURRENCY (ORIGINAL CURRENCY) Accelerant Fund II LP Venture North America USD n/a Betaworks Ventures 1.0 LP Venture North America USD 75 Black Wall St Equity Fund LP Fund of Funds North America USD 25 Bouwfonds European Student Housing Fund II Real Estate Western Europe EUR 400 Cantos Ventures I LP Venture North America USD 10 DPE III Growth Western Europe EUR 475 Fitz Gate Ventures LP Venture North America USD 15 Hidden Harbor Capital Partners Fund I Buyout North America USD n/a Polaris Venture Partners VIII LP Venture North America USD 400 Shopoff Commercial Growth & Income Fund III LP Real Estate North America USD 50 Spindletop Healthcare Growth Capital II LP Growth North America USD 200 Staley Capital Fund II LP Growth North America USD 125 Third Prime Alpha Fund LP Venture North America USD 25 Source: Bloomberg Private Equity Compiled from SEC filings, Bloomberg stories and other press reports. Reports from sources other than Bloomberg have not been verified. All figures in millions.

CLOSES July 20, 2016 Bloomberg Brief Private Equity 13

CLOSES

Recently Closed

TARGET TOTAL CLOSED IN FUND STRATEGY REGION CURRENCY (ORIGINAL RAISED TO 2016 ($) CURRENCY) DATE ($) 500 TukTuks Venture Asia Pacific Emerging USD 10 8 8 Aisling Capital IV LP Buyout North America USD 40 143 143 Arbor Debt Opportunities Fund I LP Debt North America USD 125 125 125 Arel Denver III LP Real Estate North America USD — 25 25 BGV III LP Venture North America USD 75 34 34 Blackstone Real Estate Partners Europe V LP Real Estate Any EUR 7,000 6,300 6,338 Blue Road Capital LP Buyout North America USD 500 284 433 BOV Capital Venture Fund Venture Asia Pacific Emerging INR 1,000 5 4 Cabot Industrial Core Fund Real Estate North America USD 1,100 468 468 Creation Investments Social Ventures Fund III LP Buyout Any USD — 48 116 Crown Capital Fund IV LP Debt North America CAD — 25 96 DC Capital Partners II LP Buyout North America USD 350 123 123 DCM Ventures China Fund II LP Venture Any USD 400 500 500 DFJ Growth 2016 LP Venture North America USD 500 64 64 Edison Partners VIII LP Growth North America USD 250 265 265 Essex Woodlands Fund IX LP Growth North America USD 750 98 458 Fontinalis Capital Partners II LP Venture North America USD 125 49 100 FusionX Ventures Fund I LP Venture North America USD 15 10 10 Georgian Partners Growth Fund III LP Venture North America USD 100 165 165 Golub Capital Partners 10 LP Debt North America USD — 376 446 Golub Capital Partners International 10 LP Debt Any USD — 260 437 HarbourVest Partners Mezzanine Income Fund LP Debt North America USD — 146 146 Highbridge Principal Strategies-Mezzanine Partners III LP Debt Any USD 5,500 4,618 4,618 Industry Ventures Direct LP Coinvestment North America USD 200 197 197 Industry Ventures Partnership Holdings IV LP Secondary North America USD 200 205 205 Israel Infrastructure Fund III LP Real Assets Middle East and Africa USD — 256 256 Knighthead Special Situations Real Estate Fund II LP Real Estate North America USD 250 107 108 Marlin Heritage Europe LP Buyout Any EUR 200 361 361 MedScience Ventures LP Venture North America USD 10 4 4 Mitiska First Retail International 2 Real Estate Eastern Europe EUR 120 209 209 Mobeus Equity Partners IV LP Growth Western Europe GBP 100 102 102 OpenGate Capital Partners I LP Buyout Any USD 250 202 305 Pelican Energy Partners II LP Buyout North America USD 225 210 210 RCP Fund XI LP Fund of Funds North America USD 250 189 189 RCP SBIC Opportunities Fund Fund of Funds North America USD 100 38 38 RMS Evergreen US Forestland Fund LP Real Assets North America USD — 127 127 Source: Bloomberg Private Equity Compiled from SEC filings, Bloomberg stories and other press reports. Reports from sources other than Bloomberg have not been verified. All figures in millions.

Continued on next page… July 20, 2016 Bloomberg Brief Private Equity 14

CLOSES…

Continued from previous page...

Recently Closed

TARGET TOTAL CLOSED IN FUND STRATEGY REGION CURRENCY (ORIGINAL RAISED TO 2016 ($) CURRENCY) DATE ($) Rockpoint Growth & Income Fund II LP Real Estate North America USD — 783 783 Rockwood Capital Real Estate Partners Fund X LP Real Estate North America USD — 611 611 Round Hill Music Royalty Fund II LP Real Assets Any USD — 123 123 Sango Private Equity II LP Fund of Funds Middle East and Africa USD 200 87 87 Santander Innoventures Fund Venture Any USD 100 100 200 Silver Point Specialty Credit Fund LP Debt North America USD 384 214 384 SMC Growth Capital Partners II LP Growth North America USD — 8 48 Thrive Capital Partners V LP Venture North America USD 700 700 700 US Farming Realty Trust III LP Real Assets North America USD 1,000 251 502

CALENDAR July 20, 2016 Bloomberg Brief Private Equity 15

CALENDAR

Upcoming Limited Partner Meetings

LIMITED PARTNER DATE NOTES Arizona Public Safety Personnel Retirement System 7/20 Boston Retirement Board 7/20 Detroit General Retirement System 7/20 Board meeting Firemen's Annuity and Benefit Fund of Chicago 7/20 Retirement board meeting Fort Worth Employees' Retirement Fund 7/20 Employees' Retirement System 7/20 Common investment meeting; manager presentations Oklahoma Police Pension & Retirement Board 7/20 San Antonio Fire and Police Pension Fund Board 7/20 Investment committee meeting Stanislaus County Employees' Retirement Association 7/20 University of California Board of Regents 7/20 Finance committee and board meeting West Virginia Consolidated Public Retirement Board 7/20 Board meeting Fresno County Employees' Retirement Association 7/21 Board meeting District of Columbia Retirement Board 7/21 Board meeting Illinois Municipal Retirement Fund 7/21 See From The Minutes Los Angeles Fire and Police Pensions 7/21 Board meeting Louisiana State Employees' Retirement System 7/21 See From The Minutes Michigan State Police Retirement System 7/21 Missouri State Employees' Retirement System 7/21 Education conference Municipal Employees' Annuity and Benefit Fund of Chicago 7/21 Municipal Employees' Retirement System of Michigan 7/21 Board retreat. See From The Minutes Nevada Public Employees' Retirement System 7/21 New Mexico Educational Retirement Board 7/21 Investment committee meeting North Carolina Teachers’ and State Employees' and Local Govt Employees’ Retirement Systems 7/21 Ohio School Employees' Retirement System 7/21 Oklahoma Public Employees Retirement System 7/21 Board of trustees meeting Regents of the University of Michigan 7/21 San Diego County Employees Retirement System 7/21 See From the Minutes School Employees Retirement System of Ohio 7/21 Sonoma County Retirement Board 7/21 Investment committee meeting University of Texas Investment Management Co. (UTIMCO) 7/21 Board meeting East Riding Pension Fund 7/22 Pensions committee meeting Illinois Municipal Retirement Fund 7/22 See From The Minutes University of Missouri 7/22 Board of curators teleconference San Joaquin County Employees Retirement Association 7/24 Financial meeting El Paso County Retirement Board 7/25 Milwaukee Employes' Retirement System 7/25 Board meeting Policemen's Annuity and Benefit Fund of Chicago 7/25 Investment meeting Source: Bloomberg Brief Compiled from limited partners' websites and press releases.

Continued on next page… July 20, 2016 Bloomberg Brief Private Equity 16

CALENDAR…

Continued from previous page...

Upcoming Limited Partner Meetings

LIMITED PARTNER DATE NOTES Los Angeles City Employees' Retirement System 7/26 Board of administration meeting Louisiana Assessors' Retirement System Board of Trustees 7/26 Retirement board meeting San Mateo County Employees' Retirement Association 7/26 Milwaukee County Employees' Retirement System 7/27 Board meeting Orange County (Calif.) Employees Retirement System 7/27 Investment committee meeting Pennsylvania State Employees' Retirement System 7/27 San Antonio Fire and Police Pension Fund Board 7/27 Board meeting Santa Barbara County Employees' Retirement System 7/27 Teachers Retirement System of Georgia 7/27 West Sussex County (U.K.) Pension Fund 7/27 Source: Bloomberg Brief Compiled from limited partners' websites and press releases.

LISTED PRIVATE EQUITY July 20, 2016 Bloomberg Brief Private Equity 17

LISTED PRIVATE EQUITY

Shares of Japan's Jafco Co. Ltd. rose the most of major publicly traded private equity fund managers in the week ended July 19, gaining 18.5 percent. Still, the company's shares are off 38.4 percent this year. — John E. Morris, Bloomberg Briefs

Source: Bloomberg. Prices and market caps in local currencies. Updated after the close of the market July 19.