ANNUAL REVIEW 2016 BUSINESS OVERVIEW 06 2016 overview 07 Our business 08 Strategic review 10 Markets and investment review 12 Fund Investments 14 Secondary Investments 16 Co-Investments
GOVERNANCE AND TEAM 20 Managing Directors 23 Governance 24 Responsible investing 26 Human resources 27 Remuneration policy 28 Risk management
INVESTMENT PERFORMANCE 34 Investment performance 36 Fund Investments overview 38 Secondary Investments overview 39 Equity Co-Investments overview 41 Mezzanine Co-Investments overview 42 Important information
Throughout this document, ‘AlpInvest’ or ‘AlpInvest Partners’ refers to AlpInvest Partners B.V. and its affiliated sub-advisers and unless explicitly stated otherwise does not refer to The Carlyle Group or any other Carlyle affiliate. In considering the past, targeted, or projected performance and other financial information contained herein, readers should bear in mind that past, targeted, or projected performance is not necessarily indicative of future results and there can be no assurance that targeted or projected returns will be achieved, that any AlpInvest fund or other investment will achieve comparable results, or that the returns generated by an AlpInvest fund or other investment will equal or exceed those of other investment activities of AlpInvest. AlpInvest is a leading private equity investor with a track record of over 17 years of attractive returns1.
We invest in primary funds, secondaries, and co-investments with specialized global teams that share information across the platform providing unique insights.
We believe that our size and experience have enabled us to build an unparalleled network of relationships that spans the world and gain a deep understanding of the market.
We offer clients a broad range of solutions to their private equity needs, underpinned by a disciplined, discerning, and consistent investment strategy.
Our 67 investment professionals are dedicated to applying their collective skills, insights, experience, and knowledge to maximize value for our investors.
1 Past performance is not indicative of future results or a guarantee of future returns. Return metrics are subject to change as a fund or investment portfolio matures. ALPINVEST ANNUAL REVIEW 2016 02/03
OVERVIEW AND INVESTMENTS 04-17 05 / 04 ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST Our businessOur Strategic review Markets investment and review InvestmentsFund Secondary Investments Co-Investments 2016 overview2016 BUSINESS OVERVIEW 07 08 10 12 14 16 06 2016 OVERVIEW
>10 0 151 >300 4 Number of investors Number of employees of Number of general Number of offices whom 68 are investment partner relationships across three continents professionals
COMMITMENTS RECEIVED FROM INVESTORS1 Since firm’s inception
BY INVESTMENT TYPE BY INVESTOR TYPE
€41.0bn Fund 95.8% investments Pension funds2 €13.9bn Secondary €67bn investments Total commitments €9.1bn Equity Co-investments 4.2% €2.0bn Mezzanine Insurance companies Co-investments and others €1.1bn Other
1 Total capital committed to AlpInvest includes €7.0bn of investor mandates that are managed on behalf of investors by AlpInvest Partners B.V. (or its controlled affiliates), but for which the investment decisions were made by parties other than AlpInvest or its affiliates (€6.7bn was committed before the end of 2002 and €0.2bn before AlpInvest began managing such investments in 2013). 2 Including Private Sector Asset Managers servicing public pension funds. OVERVIEW AND INVESTMENTS 04-17 07 / 06 ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST committed using to our strong network of relationships and deep knowledge of the private equity markets generate to good returns for our investors, while continuing build to the business by attracting new investors and developing complementaryexciting, new products. The Carlyle Group becoming (‘Carlyle’), fully owned in 2013. As part of Carlyle, AlpInvest benefits from access the to firm’s distribution platform, its high-quality investor services professionals, its and expertise supportto our aim of developing new, innovative products and investment strategies for the benefit of our investors. It has also enabled us invest to significantly in our reporting systems ensureto we can provide our investors with levels exceptional transparency. of However, our investment decisions remain, and will continue remain, to fully independent of our parent; and the two organizations are subject appropriate to barriers. rigorousand information commitmentOur haveWe built a solid business since we were established years over 17 ago, based on our reputation as trusted private equity advisors, an asset that we value highly. therefore We remain Having started as private equity investment manager on behalf of two founder pension fund investors nearly two decades ago, AlpInvest has grown its investor base considerably over the past few years. have We over 100 investors, well diversified by investor type and geographic location. we became In 2011, part of oneof the most respected and largest alternative asset managers, AlpInvest has a long heritage of providing investors. to solutions customized Since inception, our primary focus has been work to closely with clients help to them meet their objectives. We achieve by offeringthis comprehensive global programs through or specialized strategies. Over recent years we have thesecomplemented services by offering a selection of commingled funds to enable a broader set of investors access strategies. our to less subject competitive to pressures. overlayWe this with our rigorous and selectivehighly investment process and our guiding principle of achieving diversification by deploying capital across private equity segments, investment styles, and, importantly, across vintage years. believe We that by taking this approach, we can generate attractive returns for our investors through all stages of the economic cycle. needs investor Meeting A differentiatedA approach In an increasingly mature private equity market, we understand the value of offering a highly differentiated strategy ourto investors. believe We that we can often spot value that other investors fail see.to Our philosophy is centered on using our teams’ deep understanding of respectivetheir markets leveraging and our strong relationships uncover to investment opportunities are that difficult accessto or identify and therefore investment sourcing capabilities. capabilities. sourcing investment As a result, we can often identify opportunities ahead of other investors. , including, 2 . 1
Past performance is not indicative of future results or a As per December 2016. 31, guarantee of future returns. Return metrics are subject to change as a fund or investment portfolio matures. picture of fund manager portfolios and strategies, while also offering robust highly institutionalizedhighly processes, supported by state-of-the-art IT systems, enable information be to shared across business lines provide to a highly detailed our teams have built relationships with over 300 general partners (GPs). AlpInvest’s collaborative culture and private equity investment opportunities. strategies, investment three our Across Amsterdam, and Hong Kong, with a small representative officeIndianapolis, in to provide seamless global coverage of Managing Directors, many of whom have worked together for more than a decade. Our dedicated and experienced teams are based in New York, Our people, our platform AlpInvest employees has 151 68 investment professionals and 17 we offer a distinct and comprehensive view on the private equity market. of the largest private equity investors world on-the-ground the with an in presence across three continents, We offerWe access high-quality, to direct and investment multi-manager, Asprograms investors one for globally. returns clients our for through customized private equity programs funds commingled and investments, secondary investments, investments, secondary investments, co-investmentsand (including generate strong to – mezzanine) under management and a track record a and management under spanning years. over 17 We invest across three main strategies – fund AlpInvest is a leading global private equity investor with €39bn of assets OUR BUSINESS 1 2 STRATEGIC REVIEW
Last year again saw significant Steady investment pace distributions to our investors, along With asset prices remaining high in with a measured investment pace and some key markets, most notably the accelerated business development. U.S., we were cautious in our approach to investments during 2016. Nevertheless, As we move through 2017, I am delighted due to our deep networks and strong to reflect on a strong performance in 2016 reputation in the private equity market, for the AlpInvest business across both we sourced attractive opportunities and distributions and investments as well we made total investments of €3.6bn as in our efforts to attract new investors. across our three strategies during the We are also continuing to develop our year. This was in line with our anticipated business with the launch of new products investment pace and consistent with and services this year. our highly selective approach to portfolio construction. An important measure of our performance is the level of distributions, including Diversified investor base Paul de Klerk capital gains, to our investors. Last year Since 2011, when The Carlyle Group Chairman, CFO/COO proved to be another good period for acquired the AlpInvest business, AlpInvest, with aggregate distributions diversifying our investor base has totaling €7.3bn across all our business been one of our key aims in developing lines, one of the most significant results our business. We operate as a truly for our firm over the past ten years. independent investment platform within the group, but have the advantage of This performance was achieved even drawing on the reach and expertise of with a difficult start to 2016, when private the Investor Relations team at Carlyle. equity exits slowed due to concerns about This, combined with strong investment the stability of the Chinese economy, performance and our work over the past global commodity prices, and the rise few years of strengthening AlpInvest’s in interest rates in the U.S. at the end foundations through new hires, developing of 2015. However, sentiment improved and maintaining an equitable and through the second half of the year, rigorous investment allocation process, with the last two quarters showing high and investment in best-in-class IT and levels of distributions with strong capital reporting systems, enabled us to make gains, a trend we continued to see in the excellent progress in attracting new first quarter of 2017. We are particularly investors to our platform in 2016. By the pleased to have returned a multiple of end of the year, our investor base grew close to 2x cost of capital to our investors to over 100, up significantly from the 33 in 2016, a validation of our strategy of investors we had in 2015. This is a strong building robust portfolios and continuing result at a time when many investors are to invest across economic cycles. actively reducing the number of private equity relationships they manage in their portfolios. These new additions enabled us to maintain our assets under management at €39bn despite the high distributions we have made over recent years. OVERVIEW AND INVESTMENTS 04-17 09 / 28 9.6 0.0 0.0 5.2 0.4 115 127 481 24.1 08 39.3 (€m) 1,318 1,313 4,471 1,045 2,032 (€m) (€bn) 7,344 3,586
ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST Total InvestmentsFund Secondary Investments Equity Co-Investments Mezzanine Co-Investments Other Total InvestmentsFund Secondary Investments Equity Co-Investments Mezzanine Co-Investments Other Total Fund InvestmentsFund Secondary Investments Equity Co-Investments Mezzanine Co-Investments Other 2016 Total investments Total 2016 By investment type realizations Total 2016 By investment type Assets Managements under as per December 2016 31, By investment type Last be another to proved year periodgood AlpInvest, for distributionswith aggregate our across all €7.3bn totaling mostbusiness the of lines, one significant results firmforour over the past years ten in diversifying our investor base while ensuring that we deliver on our investors. existing our to promises willWe achieve this through careful rigorousand portfolio construction across all our business lines and strengthening investor our relations capabilities. Against backdrop, this we will continue explore to how we can deepen further relationship our with Carlyle while maintaining our investment independence and effective barriers. information regulatory regimes and we invest significant resourcesto ensure that we are compliant in all areas where we do business. In 2016, we continued our work ensureto we operated in accordance with Europe’s AlternativeInvestment Fund under Managers Directive (‘AIFMD’), which we gained our license in 2015. Outlook weDuring expect 2017, build to on the strong momentum we have generated We areWe also always cognizant of our responsibility fulfill to our regulatory obligations. The private equity industry today operates under a number of the appropriate actions were taken to mitigate any risks identified. We contractedWe an independent party to perform a cybersecurity and business continuity assessment ensured and action hedge to part of our investors’ sterling exposure reduce to currency risk. Information technology was another risk area we focused on during 2016. meant that even before the U.K.’s Brexit referendum result was known, for example, we had already taken meets quarterly discuss to exchange rate developments for each of the mandates This structured manage. we approach are well protected from such volatility by building diversified portfolios but also through our foreign exchange panel that exchange risk was a particular issue for investors, given the volatility of many currencies in 2016. AlpInvest has robust procedures for ensuring investors our ensuring it identifies and manages risks theto business and the to investments the firm makes. Last foreign year, As a prudent investor, risk management is fundamental our to business and AlpInvest pays considerable to attention relationships, products, services. and Managing risks the strength and quality of the AlpInvest platform and provides momentum for further development of new partieswith whom we can engage and discuss new and differentproducts. The acceleration of our plans build to out our investor base is a recognition of depth of our investors provide continuity and considerable value for the AlpInvest platform, as they are highly respected investors, representing capital from across the globe and the spectrum of institutional investor type. The quality and We areWe particularly delighted welcome to such a strongly diversified group of MARKETS AND INVESTMENT REVIEW
A strong second half of 2016 boosted Exits strong but down our distributions to investors, although This had an inevitable effect on private we remained concerned about high equity exit values and volumes. Overall, asset prices for new investments. the aggregate value of exits fell by 24% by In line with our cautious and consistent value and 9% by volume on 2015 figures, approach to portfolio construction, according to Preqin, with the full-year we will be watching closely as events numbers dampened by a sluggish first unfold through 2017. half for realizations. However, 2016 was still a strong year for exits, with $336bn, In many senses, 2016 was a year of two the fourth highest annual amount ever halves, with M&A activity relatively slow realized by private equity. The pattern of for the first two quarters but gathering distributions from the AlpInvest portfolio momentum following the summer. The reflected this, with much higher levels of year ended with $3.9trn of M&A deals distributions and returns generated in the worldwide – lower than 2015 totals, but second half of the year than in the first the third highest on record, according half. Looking forward, the industry is now Wouter Moerel to Dealogic data. Where enthusiasm for at a stage where the significant amount Managing Director transactions was dampened in the early of capital deployed in the boom years of part of 2016 by falling equity markets 2005-2007 has largely been returned in response to lower growth figures and so we expect exit levels to normalize emerging from China, nervousness accordingly over the coming period. around the Federal Reserve’s interest rate rise in December 2015, and continued Asset pricing remains full volatility in global commodity markets, The recovery in investor sentiment investor fears of a global slowdown through 2016 and early 2017 has resulted dissipated as the year went on. Even in in further increases in asset prices. We the face of an unexpected result from highlighted this as a concern in our 2015 the U.K.’s Brexit referendum in June, annual review and the past 12 months investor confidence picked up as the have seen further increases in the U.S. year progressed. in particular as the low interest rate environment persists, despite three Sponsored transactions followed a similar Federal Reserve interest rate rises trajectory. While leveraged buyouts (LBOs) between December 2015 and March remained subdued in the first quarter, 2017. According to S&P Capital IQ LCD sponsored deals regained significant data, purchase price multiples in the U.S. momentum during the rest of the year. averaged 10x EBITDA in 2016, more or less However, this catch-up process was not unchanged from 2015, but considerably enough to prevent an annual decline of higher than during the previous buyout 10% relative to the previous year. cycle in the mid-2000s. OVERVIEW AND INVESTMENTS 04-17 11 / 10 ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST reach and to moderate slightly slightly moderate to and reach our investment pace compared with recent years Equally important, we are monitoring closely macroeconomic trends and possible monetary policy responses to the expected pick-up in global economic growth and associated inflation dynamics. How central banks react is likely have to important effects on long-term interest rates, spreads, and rates.exchange areWe aware that political, regulatory, and economic developments may have significant impacts on the private equity industry. Nevertheless, experience our has shown us that uncertain times can bring some of the best investment opportunities.will We therefore continue keepto an eye on external events and implement our investment strategy to capitalize on opportunities that arise as progresses. year the The responserobust pricing to and levels high of competition assetsfor parts many in has buyout market the of on focusing continue to been opportunities harder are that identify to and investors for negotiations around exit the U.K.’s from the European Union and upcoming elections in some key member states, through the to effects of new initiatives and regulatory changes in the U.S. led by the new administration. Trump living through a period of geopolitical uncertainty. are,We as we have always investors long-term disciplined been, committed building to carefully constructed portfolios across economic cycles that are robust even in more challenging environments. approach Our is one that looks beyond daily headlines to determine medium- to long-term trends, and it is these that inform how we apply our investment strategy. areWe watching closely as developments unfold globally from through 2017, centric mid-market deals than plain vanilla fund position transactions. Given that we perceive pricing in the U.S. be to particularly rich, we have also focused our attention more on other regions, such as Europe and Asia, where we have sourced attractive investment opportunities benefit that from relatively lower purchase price multiples. ahead The year As demonstrated, 2016 we are now This is true across our entire portfolio, but is especially pertinent our to secondaries investment strategy, where we have concentrated more on sponsor-
are more attractive. GPs have proven ability create to value in the portfolio companies they back and where purchase price multiples compared with recent years. Our strategy has been target to high-quality, mid- market investment opportunities where on opportunities for on harder are that investors identify to and reach and to moderate slightly our investment pace For AlpInvest, the response robust to pricing and high levels of competition for assets in many parts of the buyout market has been continue to focusing Sourcing opportunities off the beaten track private equityfund managers have, on the whole, remained disciplined in investmenttheir choices. fell significantly short of the numbers recorded in the years running up to crisis. financial the suggestsThis that help explain why the value and volume of transactions completedby private equity last year – although robust – In Europe, purchase price multiples reached almost the same level in 2016 from in 9.2x 2015. High entry prices EBITDA: Purchase price multiples in the US, according S&P to Capital IQ LCD 10x FUND INVESTMENTS
As our robust portfolios continued to deliver good distributions in 2016, we Our global mandate, remained disciplined investors, seeking underpinned by deep and to identify funds with a demonstrable strong relationships with track record of value creation. GPs and our reputation as a Our fund investment business stable and supportive investor, distributed €4.5bn to investors in 2016, makes us an attractive partner a solid performance at a time of slightly for fund managers reduced exit activity over the previous year. Our 2016 distributions were also higher than those of 2013 and 2014. However, we also advised our (prospective) This strong result reflects the robust and clients to place greater emphasis on well-balanced nature of the portfolio of deploying capital in Europe and Asia investments we have made over the years. in 2016, where we believe asset prices remain less fully priced and where we Our investments also remained resilient see greater potential for strong returns. in the face of the foreign exchange volatility witnessed in 2016, as the strength Nevertheless, the persistent low interest of our U.S. dollar exposure compensated rate environment continued to exert for weaker currency valuations elsewhere, upward pressure on company valuations enabling us to produce strong rates globally through 2016. Against this of return for our investors. This is the backdrop, we continued to focus our result of our focus on building high- attention on sourcing fund investment quality portfolios of private equity fund opportunities with strong teams that have investments that are customized to meet a demonstrable track record of and future the needs of our investors and diversified ability to create value in the companies by geography, company stage, investment they back, with operational improvements strategy, and vintage year. a key part of the strategies we actively seek out. As our experience shows, these Commitments on target funds are often the most resilient to Through 2016, we made a total of external shocks and have the capacity to €1.1bn in new commitments across generate strong returns in good and more 35 partnerships with a 2016 vintage, challenging times. investing in high-quality GPs across all segments and geographies. This was in line with our target, despite increasing concerns around asset pricing in the U.S., in particular. We continued to commit to high-quality U.S.-based funds, given our philosophy of achieving a well-diversified portfolio for our investors. OVERVIEW AND INVESTMENTS 04-17 13 / 12
ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST 35 new fund investment commitments in 2016 €4.5bn distributions investors to in 2016 capable of strong performance in good bad. and times as a firm, we have been through a economic cycles of number we know and that periods of change bring opportunity as well as risk. therefore We continue observeto events and trends globally determineto how we might apply our investment strategy capitalize to on opportunities as they arise. As long-term, investors, experienced and disciplined, we remain committed building to high- quality portfolios of investments that are tailored meet to our clients’ respective needs, while also being robust and As we saw in 2016, the year ahead may bring further volatility and geopolitical uncertainty.There may, for example, finally be some softening in asset prices as we progress through the year and we expect further uncertainty about the role of the U.K. in the European economy as Brexit discussions start in earnest over the coming months. While the effects of these trends and developments remain unknown, our long-standing experience means that, the industry’s investment pace has been moderate.High levels of competition for assets in many markets, led largely by strategic buyers seeking acquisitions, are leading premium to pricing. For the most part, private equity buyers have remained disciplined in their approach to the market. While this has led record to levels of dry powder, we believe there may be better opportunities ahead for funds deploy to this capital. Looking ahead Looking areWe encouraged note to that, despite private many among fundraising strong equity funds months, over the past 12-18 on behalf of our clients. view investment opportunities in granular detail across fund performance, team skills and strategies, we can identify investments with strong return potential all three of our business lines – Fund Investments, Secondary Investments, and Co-Investments. With an ability to organization, built out over a number of years, allows us benefit to from information flows captured across competitive processes, an achievement validatesthat strength the quality and of our platform. Our highly institutional Our fund investment business continued to attract new investors in 2016. AlpInvest won several mandates from well-regarded investors in year diversification for our investors. our for diversification year New mandates remain disciplined in the commitments we selected while maintaining a steady investment pace and ensuring vintage our reputation as a stable and supportive investor, makes us an attractive partner for fund managers. This meant we could Our global mandate, underpinned by deep strongand relationships with GPs and investors maintain to or increase their private allocations while reducing the number of GP relationships, continued to affect market conditions. but access top to performers became still more challenging last Strong year. distributions, coupled with trend the for of intensified competition for allocations fundsto with the best return potential. This was already in evidence in 2015, Intense competition Our commitments were made at a time SECONDARY INVESTMENTS
In 2016, we realized strong gains for our A differentiated strategy And finally, we focus on funds with the investors while leveraging our networks We were able to maintain discipline and potential to provide strong cash-on-cash to source and identify a number of source high-quality secondary investment returns. This strategy creates robust attractive investment opportunities in opportunities because of our differentiated portfolios that continue to deliver strong a competitive market. We also raised approach to the market and our integrated distributions throughout the economic $6.5bn in commitments for AlpInvest platform. Across our three lines of cycle. It also enables us to be flexible Secondaries Program VI (‘ASP VI’) in business, AlpInvest has over 300 according to market conditions, as our 2016 and early 2017 1. sponsor relationships. investments in 2016 demonstrated.
In a market characterized by slightly Our teams work collaboratively to share Our investments in 2016 lower exit values and volumes than in information, offering unparalleled insights Over the course of the year, we concentrated previous years, our secondaries business into GP performance and investment mainly on sponsor-centered secondary recorded strong distributions in 2016. style as well as providing us with a view investments, with €880m committed We returned €1.3bn to our investors over of where we can offer sponsors solutions through six transactions. These sponsor- the year, of which 55%, or over €700m, through secondary transactions. centered investments are more difficult were gains. This is a higher proportion of to execute and require proactive sourcing gains than we achieved in 2015 and serves In our secondaries business, our and substantial due diligence. They can as validation of our differentiated approach investment strategy is underpinned generally be completed at lower entry to secondary investment. by four key areas of focus. First, we enterprise value to EBITDA multiples focus on investing alongside the best than plain vanilla secondary investments, We also sourced some attractive private equity managers globally, and where competition has been higher. investment opportunities against a use the AlpInvest platform to identify Of the six we completed in 2016, five were backdrop of increased competition for these managers and source proprietary directly sourced through our platform. secondary investments. The secondaries secondaries investments. Second, we market continued to be robust with seek out opportunities where we can $39bn of completed transactions in 2016, acquire high-quality underlying assets Our teams work collaboratively compared to $40bn in 20152. At the same that have clear remaining value creation to share information, time, we continued to experience elevated potential, so that our investments continue offering unparalleled insights pricing for diversified LP portfolios and to grow in value over time. Third, we greater use of leverage among a number primarily buy positions in funds that into GP performance and of large buyers. We remained disciplined are three to six years into their lives investment style as well as in our approach and committed €1.3bn to capture the realizations of some of providing us with a view of across nine secondary investments in the best-performing companies in the where we can offer sponsors 2016, consistent with our target range portfolio early on in our investment while of €1bn-€1.5bn for the year. still benefiting from the upside achieved solutions through secondary through value creation in remaining transactions portfolio companies. OVERVIEW AND INVESTMENTS 04-17 15 / 14
ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST Includes amounts which require investor Source: Triago. Includes commitments received through we consider the U.S. market as being at, or close the to top the of, current economic cycle. In addition, we anticipate a slightly less positive environment companiesfor public and markets over the medium term as economic moderates. growth willWe therefore continue take to a cautious and prudent approach to our investments, while identifying opportunities that arise from a shifting economic outlook. As long- term investors, we recognize that the investments we make today may be sold different a in economic political and/or climate. Our focus will therefore remain robust, diversified building on portfolios of high-quality investments with good value creation potential and the ability to generate strong cash-on-cash returns investors. our for consent to be invested. March 31, 2017. Future opportunities With successful a fundraising process secondaries our completed, business now has significant firepower to take advantage of future investment opportunities that will emerge as the global economy faces increased volatility. As we progress through 2017, we continue see to signs of geopolitical uncertainty in a number of markets and 1 2 3 3bn , including amounts reserved 1 in capital from over 80 new 1,3 distributions investors to in 2016 for certain investors. ASP VI is expected investto around $1-2bn annually over four years. have We been highly encouraged by the response our to process,fundraising added having $3.6bn investors, a development that contributes significantlyto AlpInvest’s aim of diversifying its investor base. to allocateto further capital this to strategy over period. coming the Fundraising progress In addition securing to new investments, our team made excellent progress on raising AlpInvest’s $6.5bn ASP VI. The program consists of $3.3bn commingled a commitmentsin to AlpInvestvehicle, Secondaries Fund VI, and $3.2bn in commitments from investors in separately managed accounts $1. energy portfolios, where we continue seeto attractive pricing and believe we are well positioned take to advantage of a dislocation in the market. In 2016, we twocompleted secondary energy deals, deploying €85m in total. As the long- term outlook for the energy market has stabilized over recent times, we expect
to the transactions. the to Inthe meantime, we have also further built out our exposure secondary to acquiring positions in funds in which we were already invested and where we offer could differentiated a angle at the time by uncertainty around the EU referendum.U.K.’s The other two, smaller portfolio investments involved pension fund for a total of more than €440m. The investment was made at an attractive valuation, with pricing affected the market was characterized by one of these investments in particular. In the second half of 2016, we acquired a portfolio fund of 13 positions from a for these investments. Our investment in this part of the market totaled €400m across three deals. Our approach to and complete a limited of number a complete and high-quality LP portfolio transactions, despite the broader competitive market European buyout companies. In 2016, we also managed source to investments. The transaction provided AlpInvest clients with exposure to attractive recent investments in included a 25% stake in Eurazeo Capital’s seven existing unlisted investments, plus a new investment be to completed as well as capitalin 2017, for add-on directly by leading with the a GP, transaction acquire to an LP interest in Eurazeo Capital II. Eurazeo Capital II Eurazeo, which is based in France. directlyWe sourced this investment through our platform and negotiated One such investment was the transaction we completed with publicly listedfirm CO-INVESTMENTS
Last year saw strong distributions in a We deployed almost €500m across While we invested in some select large more normalized exit environment and 25 new co-investment deals and one buyouts to achieve a diversified portfolio, we continued to build robust portfolios mezzanine transaction. This is in line the environment of higher pricing and of co-investments and mezzanine with our target investment pace, which is elevated debt multiples at the top end investments sourced through our designed to ensure that our investors have of the market persisted. We therefore network of strong relationships with good vintage year diversification while also maintained our cautious stance to fund managers globally. maintaining our disciplined approach to investment opportunities in this space. selecting only the opportunities with the We also placed a greater emphasis in During 2016, we distributed a total of greatest potential for strong returns. our portfolio construction on defensive €1.4bn to our investors from our co- sectors and declined some opportunities investment and mezzanine program, Platform benefits to invest in more cyclical industries, in which was a strong result at a time when AlpInvest’s integrated platform that the context of the current macroeconomic the exit market reverted to more normal spans our fund investment, secondary environment. levels than were in evidence in 2015. investment, co-investment and Deal flow levels remained very healthy mezzanine opportunities gives our firm In mezzanine, we continued to build despite a modest contraction of the private informational advantages and enables us out a well-diversified portfolio, while equity market. to leverage GP relationships across our recognizing that debt markets have been teams. Over a number of years, we have highly liquid over recent times. In 2016, Strong deal flow, cautious approach further focused on actively building out spreads in debt products narrowed We continued to see strong deal flow relationships with GPs in the attractive but considerably and credit terms continued through 2016 in our co-investment difficult-to-access mid-market segment. to loosen and, as a result, our investment program and we reviewed over 180 In 2016, we continued to see the benefit of pace was deliberately somewhat slower opportunities during the year. This was this effort, with a large proportion of our than in previous years. one of the highest numbers in our firm’s co-investments made alongside mid- history and demonstrates the depth and market GPs, where we see great value breadth of our relationships with general creation potential. partners. The value of invitations to invest was also strong, at around $7.5bn. This was slightly lower than the value for In 2016, a large proportion of 2015, but it represents an increase in our our co-investments was made market share, given the lower aggregate alongside mid-market GPs, private equity investments total reported by Preqin. where we see great value creation potential OVERVIEW AND INVESTMENTS 04-17 17 / 16 ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST 7.5bn 26 equity mezzanine and co-investments made in 2016 of invitations co-invest to 180 reviewed opportunities co-investment during 2016 optimistic about the buyout market expect We in maintain 2017. to our investment pace in line with our approach of vintage year diversification in the programs and funds we manage on behalf of our investors. $ Outlook for 2017 we are mindfulFor 2017, of the uncertain macroeconomic geopolitical and environment, but remain cautiously investments from a deep and a deep from investments global pool opportunities of regional presenceregional across key markets, can we often select As a global investor, As a global investor, supported strong by our and resultsand additional in opportunities in dealour pipeline. to investors.to This differentiating strategy is designed ensure to that we are an attractive reliable and partner GPs for seeking additional capital deals their for equity in live deal processes as opposed syndicatedto deals where the GP signs the deal and then syndicates some equity is another important driver of our deal flow. These are transactions where we support the lead GP co-underwrite to the economic environment. Our strategic focus on co-sponsor deals industry experience allow us focus to on more resilientbusinesses that continue performto well in more a challenging presence across key markets, we can often select investments from a deep and global pool opportunities. of addition, In our sector-agnostic strategy and deep the potential for greater economic greater for potential the volatility. However, as a global investor, supported strong regional our by increased, as the U.K. voted leave to the unexpected the and Union European outcome of the U.S. election created Global reachGlobal In 2016, geopolitical uncertainty
GOVERNANCE AND TEAM 18-31 19 / 18 ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST
Managing DirectorsManaging Governance Responsible investing resourcesHuman policyRemuneration Risk management Risk
GOVERNANCE TEAM AND 20 23 24 26 27 28 MANAGING DIRECTORS
01 04 07
02 05 08
03 06 09
01 Paul de Klerk 04 Neal Costello 07 Sean Gallary Paul is the Chief Financial Officer and Neal is a Managing Director in the Sean is a Managing Director in the Chief Operating Officer of AlpInvest Secondary Investments team and AlpInvest Partnership Funds team Partners and the Chairman of the focuses on transactions in Europe. He based in New York. He joined AlpInvest Board. He co-founded AlpInvest, is also a member of the Investment from Tunbridge Partners, which he chairs the Operating Committee, and Committee. Neal rejoined AlpInvest co-founded, and where he was Portfolio is responsible for the investment Partners in 2015 from Canada Pension Manager, as well as a member of the portfolio valuation and review process. Plan Investment Board. He originally Board of Directors and Investment Before joining AlpInvest, Paul was joined AlpInvest in 2003 in the New Committee. Before founding Tunbridge responsible for one of the largest York office and ultimately led the firm’s Partners, Sean worked at ORIX USA corporate banking units at ABN AMRO secondary efforts in Asia through 2013. Asset Management, Asset Management in the Netherlands. Previously, Neal was with CIBC World Finance (AMF), and Sandler O’Neill Markets’ Mergers & Acquisitions & Partners. 02 Victor Backstrom1 Investment Banking division. Victor is a Managing Director 08 Michael Hacker responsible for Investment Solutions 05 Rob de Jong Michael is a Managing Director in Sales in Europe, based in London. He Rob is a Managing Director and the Secondary Investments team, joined the firm from Brummer and leads AlpInvest’s Co-Investments where he is responsible for sourcing, Partners, where he was a Director team. He focuses on equity evaluating, and executing transactions working with European investors transactions in Europe and is also in the North American market. He relations based in Stockholm and a member of the Operating Committee. is also a member of the Investment London. Prior to that, Victor worked He joined AlpInvest in 2001 from Committee. He joined AlpInvest at Man Investments and Accenture. PricewaterhouseCoopers, where Partners in 2007 from UBS Investment he was a Senior Consultant for Bank, where he was an Associate 03 Peter Cornelius Corporate & Operations Strategy, Director in the Private Funds Group Peter is a Managing Director responsible for advising and assisting responsible for providing secondary responsible for analyzing the economic multinationals and governmental markets advisory services. and financial environment for private organizations on developing corporate equity markets and examining the and business strategies. 09 Eric Hanno implications for AlpInvest’s strategic Eric is a Managing Director in the asset allocation. Peter joined the 06 Richard Dunne Private Equity Investment team, firm in 2005 from Royal Dutch Shell, Rich is a Managing Director in where he is responsible for sourcing, where he was Group Chief Economist. AlpInvest Partners’ Co-Investments evaluating and, executing transactions He is the author of International team and is responsible for sourcing, with a focus on the Americas. Eric Investments in Private Equity executing, and monitoring transactions rejoined AlpInvest Partners in 2015 (Elsevier, 2011) and co-author of in North America. He is also a from Partners Group, where he led its Mastering Illiquidity (Wiley, 2013). member of the Investment Committee. U.S. buyout and distressed primary Rich joined AlpInvest in 2004 and activities and served on the Investment has 15 years of related investment Committee. Previously, Eric was an experience. Prior to joining AlpInvest, Associate at AlpInvest Partners and he he worked in the Investment Banking started his career at Goldman Sachs. division of Citigroup Global Markets.
1 Victor Backstrom is employed by CECP Advisors LLP, an affiliate of The Carlyle Group. GOVERNANCE AND TEAM 18-31 21 /
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Maarten Vervoort Wendy Zhu George Westerkamp Westerkamp George She is also a member of the Operating Committee. She joined AlpInvest Partners in 2007 from Macquarie Management, whereFunds she was Senior Vice President of Asia- Pacific regional private equity fund co-investments. and investments Wendy represents AlpInvest on various advisory boards. Maarten leads AlpInvest’s Fund Investments team and is a member of the Investment Committee. Maarten has been with AlpInvest Partners from the outset. He joined from PricewaterhouseCoopers, where he was a Senior Management Consultant in the corporate strategy area. He represents AlpInvest on many advisory boards. George is a Managing Director in the Investment Solutions team at AlpInvest and is a member of the Operating Committee. From 2000 2010,to he was a Partner in the Co-Investments team, where he buyoutfocused on transactions in Europe. From 2000 2012, to he was a member of the Investment Committee. George joined AlpInvest from its predecessor, Parnib, where buyout middle-market executed he transactions Netherlands. the in Wendy is a Managing Director in AlpInvest’s Fund Investments team and focuses on the Asian markets. ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST
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Sander van Maanen Roberto Torrini Erik Thyssen the Italianthe European and markets. Sander heads the Hong Kong office and is a Managing Director Co-Investments AlpInvest’s in team, where he focuses on equity transactions Asia in Australia. and He joined the firm in 2001 from Boston Consulting Group, where he was a Project Leader on assignments boards the for multinational firms. of than 25 years’than experience financial in services. He joined the firm from Fortis Bank Nederland, where he was an Executive Board member responsible commercial for banking. Roberto is a Managing Director in Co-Investments Partners’ AlpInvest team and focuses on equity transactions in Europe. He joined AlpInvest Partners in 2013 from Advent International, where he was executing Director responsible for a and managing private equity deals on Erik is a Managing Director in team, Co-Investments AlpInvest’s focusing equity on transactions in Europe. He is also a member of the Board and a member of the Investment Committee. Erik co- founded AlpInvest and has more 13 14 15 15 14 13
Chris Perriello Christophe Nicolas Wouter Moerel 2007 from Paul Capital, where he was a Principal focused on fund AlpInvest represents Chris investing. on multiple advisory boards. team and focuses on transactions in the Americas. He is also the Chairman of the Investment Committee. He joined AlpInvest in Chris is a Managing Director in Investments Secondary AlpInvest’s Morgan Stanley, whereMorgan Stanley, co-headed he the firm’s secondariesteam out London. of in AlpInvest’s Secondary Investments team and focuses on transactions in Europe and the Middle East. He joined AlpInvest from in 2012 advisory boards. Christophe is a Managing Director The Carlyle Group, where he was a Principal responsible for investments in the telecoms and media sectors. He represents AlpInvest on multiple leads AlpInvest’s Secondary Investments team. He is also a memberof the Operating Committee. Wouter joined AlpInvest in 2005 from Wouter is Managing a Director,
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GOVERNANCE AND TEAM 18-31
23 / 22 ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST Erik Thyssen.Erik The Operating Committee The Operating Committee focuses on the day-to-day management, strategy policiesand concerning client-related activities, including providing advice on investment objectives and terms conditions,and investment-strategy monitoring, and related regulatory and compliance matters. Paul Klerk, de CFO/COO and Managing Director of Alpinvest, chairs the Operating Committee. Other members are Lauren Dillard AlpInvest Directors and Managing George Westerkamp, Wouter Moerel, Rob de Jong, and Wendy Zhu. areWe committed strong, to effective governance and we are confident that we have in place the necessary structures to rigorous robust a approach. and maintain The Investment Committee The Investment Committee, which meets on a nearly weekly basis, is responsible for making the final investment decisions for our business. It is chaired by Chris Perriello, Managing Director of AlpInvest. Other members of the Investment Committee are AlpInvest Managing Directors Neal Costello, Richard Dunne, Maarten Vervoort, Hacker, Michael and In 2017, Wouter Moerel,In2017, Managing Director of AlpInvest, will join the Board whilst Erik Thyssen will at that point in time step down from the Board. This change is subject regulatory to approval. AlpInvest also has two committees that are involved in the day-to-day operations of the firm: the Investment Committee and the Operating Committee. Operating Officer and a member of the Board, took over as Chairman from Jacques Chappuis, who stepped down from the Board on December 2015. 31, Other members of the Board are Glenn Youngkin, President and Chief Operating Officer of The Carlyle Group, Lauren Dillard, Carlyle a Managing Director and Head of Carlyle Investment Solutions, who joined the Board on January 2016, and Erik 1, Thyssen, AlpInvest. Director of Managing business segments, other than for certain regulatory, reporting, similar and purposes. This is a crucial component of our agreement with Carlyle, and both parties recognize its vital importance. The Board The Board responsible is determining for the AlpInvest strategy and developing the business. It comprises four Directors. On January 2016, Paul 1, de Klerk, AlpInvest’s Chief Financial and Chief Thisinformation barrier restricts the flow non-public,of commercially sensitive from Solutions information Investment Investment Solutions the to other Carlyle
business segments of Carlyle, on the other. its affiliated entities. Carlyle maintains a one-way information barrier between Investment Solutions (which includes AlpInvest), on the one hand, and the other AlpInvest carries out its investment operations Carlyle independently of and alternative investment strategies – private equity and real estate – on a global basis. and implementation. The Investment Solutions platform seeks give to investors access large to and complex Solutions business segment (‘Investment Solutions Investment Solutions’). helps clients meet their objectives through tailored portfolio construction Since August 2013, AlpInvest 1, has been wholly owned by The Carlyle Group and forms part of Carlyle’s Investment to boostto performance enhance and returns. investment AlpInvest’s systems and strategy is a belief in the need for firm, effective management and internal discipline and our returns. behind philosophy underlying The Throughout the firm, we maintain a operational to approach disciplined investmentand decision-making, and this shapes our culture, our processes, We prideWe ourselves on being trusted partners stakeholders, our and to strong governance breeds this trust. and how we operate. It determines operate. It we how and theway we act within the firm, with investors, shareholders. with and At AlpInvest, robust governance is governance robust AlpInvest, At a fundamental part of who we are GOVERNANCE RESPONSIBLE INVESTING
In 2016, we continued to make good We also updated the evaluation tool progress in all aspects of our work We also believe that we have that helps our teams to assess how far on responsible investment, including an important role to play in advanced GPs are in their processes reviewing our environmental, social, and raising responsible investment and management of ESG issues. The governance (‘ESG’) standards, updating findings of the questionnaire will continue our GP due diligence questionnaire standards across the private to be included in investment proposals. (‘DDQ’) and supporting industry-wide equity industry by working This, of course, is a continuation of the initiatives that promulgate adoption of with the funds we back and work we have already undertaken in responsible investment practices. our investor base to improve this area. By the end of 2016, over 500 of our investments across all lines of our Responsible investment has always been practice, reporting, and business had been assessed according at the heart of the AlpInvest philosophy transparency to responsible investment criteria. and we have been signatories to the Principles for Responsible Investment We have also made progress toward (‘PRI’) since 2009. We also believe that we This is also important for our investors, creating standardized frameworks for have an important role to play in raising many of which are increasingly adopting reporting of ESG factors by GPs. We responsible investment standards across responsible investment approaches. Our continue to actively strive for the GPs the private equity industry by working founder investors were at the forefront we invest with to commit to responsible with the funds we back and our investor of the responsible investment movement investment practices and disclosure. In base to improve practice, reporting, and their thinking helped shape the 2016, the majority of GPs we invested with and transparency. AlpInvest philosophy. As we continue to were in a position to commit to responsible diversify our investor base, we welcome investment policies. The responsible Continuous development new institutions that can count on our investment reporting template we Our approach to responsible investment responsible investment approach that is developed in 2015 has proven very helpful is one of continuous development to institutionalized across all our processes. for many GPs in understanding how they ensure that we remain leaders of industry can adopt best practice. We also continue practice and thinking. Over the past Moving toward standardization to maintain an active dialogue with both year, we have reviewed and updated our We believe that further standardization fund managers and our investors to own responsible investment standards, of evaluation and reporting of ESG promote transparency. which were originally drawn up in factors is important if we are to see more 2008, to reflect how we developed our widespread adoption of responsible approach over the years and to bring investment practices. In 2016, we updated them in line with the way we operate our responsible investment due diligence today. The latest enhancements to our questionnaire to align with the PRI’s LP processes across our primary, secondary, responsible investment DDQ initiative. >500 and co-investment business lines are We use this revised questionnaire across investments assessed according designed to ensure that the consideration all new primary fund investments and in to responsible investment criteria of ESG factors is embedded across all our secondary investments where primary decision-making. commitments form part of the transaction. GOVERNANCE AND TEAM 18-31 25 / 24 ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST
insight on how they are implementing ESG policies and reporting. This will provide information on the extent to which further action or engagement is needed on our part. And, importantly, we will continue provide to high-quality information our to investors on the responsible our implementation of investment standards and help to them meet their own responsible obligations.investment from discussion to integrating integrating discussion to from ESG factors investment into and firm-wide decision- processesmaking Our work for 2017 Overthe coming our key priority year, is roll to out the new responsible investment DDQ. will We also focus on reviewing the progress of the GPs we invest with and expect gain to further We are encouragedWe note to moving now GPs are many that . We remain. We Value Creation Through Creation Value metrics over the next few years. to seeto further evolution, with GPs increasingly able provide to effective reporting responsible on investment from discussion integrating to ESG factors into investment and firm-wide hope processes. We decision-making the early stages of adopting responsible investment policies, we are encouraged noteto that many GPs are now moving and develop best practice and, over the we have seen considerablepast year, evolution among many GPs in this area. While some fund managers are still in Initiatives such as these are important opportunities for the industry share to and of the ESG Committee of the Dutch Private Equity and Venture Capital Association (‘NVP’). Responsible InvestmentResponsible active members of Invest Europe’s Responsible Investment Roundtable Integrating Responsible Investment, and we contributed a chapter a recent to publication, by SuperReturn, Responsible the Investment Forum, and Women in Private Equity. provided We a presenter for a course run by Invest Europe, 2016. AlpInvest team members spoke about responsible investment themes at conferences such as those organised responsible investment practice and thinking through involvement our in external events and initiatives throughout Sharing best practice continuedWe our work of advancing HUMAN RESOURCES
Our people are integral to our firm’s to the benefit of our investors and general As an equal opportunities employer, success, generating returns for our partners. Experience is also an essential we are committed to promoting diversity, investors and their beneficiaries. component of successful investment in all respects, throughout the firm. So we endeavor to inspire, support, management: there is no substitute for We work to preserve and improve on and motivate our employees through having lived through and invested across the gender balance and diverse range our development programs and an entire market cycle, as most of our of nationalities and cultures represented reward systems. senior team members have done. across our workforce.
We believe that our values of mutual We invest substantial time and attention We strive to build a supportive and respect, professionalism, and integrity in the professional development of respectful environment where people encourage long-term commitment to our staff, including both formal and feel motivated and fulfilled in their our firm. Our senior staff1 has on average on-the-job training, at all levels of the work. We are committed to achieving been with us for almost eight years. organization. We also engage in appraisal this objective. processes at least once a year on a This stability contributes to a consistent formal basis. Informally, we encourage approach to investment execution, continuous feedback.
2016 OVERVIEW1 AMSTERDAM GENDER 27 86 65% 35% 151 Investment Total employees Male Female Total number of employees professionals
NEW YORK/INDIANAPOLIS NATIONALITY 30 50 67 45 Investment Total employees Dutch U.S./Canadian 8 2 Average years at AlpInvest professionals
HONG KONG 15 24 Other Europeans/ Rest of World 11 15 Russian Investment Total employees professionals 1 As of December 31, 2016. 2 Managing Directors and Principals. GOVERNANCE AND TEAM 18-31 27 / 26 Distributed to to Distributed AlpInvest Partners AlpInvest investors Distributed to to Distributed ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST is distributed is predefined with our investorsin each mandate. between proceeds of distribution The illustrated is AlpInvest and investors by the bar chart below. The first bar represents the total amount of investments, costs, management and fees. The second bar shows the total proceeds generated by these investments (including the sale of investments). The third and fourth bars illustrate how these proceeds are proportionally distributed between AlpInvest. and investors known as the hurdle rate. All costs and management fees have be to repaid as well. When all invested capital has been repaid, all expenses have been covered, and investment returns have exceeded hurdlethe rate, additional returns are shared between AlpInvest and our investors. The way in which this capital sale of all sale investments Total proceeds after after proceeds Total costs, and costs, management fees Total investments, investments, Total hurdle rate hurdle Investments Return above Return above Cost and fees Cost Carried interest Preferred return Preferred Distribution of proceeds of Distribution Our carried-interest program Carried-interest programs are designed promoteto long-term alignment between staff and investors, as eligible employees receive a share of the returns that received. have themselves investors employees rewarded are only However, if investors have received back all of their capital plus a pre-agreed upon return, Additionally,a number of managers are awarded restricted Carlyle units, typically schemes Both annually. have a vesting period as an additional retention incentive. Our remuneration policy has been honed over more than a decade. believe We that encouragesit rewards and effort genuine in a way that delivers sustained, long- term performance for the benefit of all investors. our In 2013, AlpInvest’s management sold its stake in the firmto our majority Carlyle. return, In shareholder, those managers became Carlyle holders. unit
financial milestones. of each year. Variable components each year. of of staff remuneration are only paid out if AlpInvest itself meets specific We use independent, external guidance help to structure bonuses for employees and provide specific targets for employees at the beginning is based on each employee’s annual appraisal, which takes into account financialand non-financial criteria. The decision grant to a discretionary bonus, and the size of that bonus, make a significant personal investment in our private equity program alongside investors. our at least 50% of the variable tranches, encouraging long-term a commitment to the firm. we have Since expected 2011, all senior investment professionals to comprise discretionary a and/ bonus or carried interest. Equity or equity- linked instruments typically make up Managing Directors, Principals, and Vice Presidents consists of a fixed variable a and component, which can We aimWe remunerate to our professional support appropriately, and staff fairly, and objectively. Remuneration of given the long-term nature of private investments. equity Most of our senior managers have been with AlpInvest for many years, enhancing continuity promoting and a collegial environment. This important, is to deliverto the to best of their abilities and foster a culture in which they feel a genuine commitment the to firm. and investors.and seekWe incentivize to our employees AlpInvest’s remuneration policy isAlpInvest’s designed to align the interests of staff REMUNERATION POLICYREMUNERATION RISK MANAGEMENT
Risk management is fundamental to External risks Business risk our business. We insist on the highest As an investor in developed and emerging AlpInvest is dependent on funding standards of integrity and employ a markets, our investments are affected from its investors, which are primarily rigorous control framework across by macroeconomic and geopolitical reputable pension funds and other all business lines, geographies, developments, as well as changes in reputable institutional investors. Investors and professional functions. government policy and regulations. can change their strategies regarding To help mitigate such circumstances, allocations to the private equity asset AlpInvest is committed to the delivery of we aim to diversify our investment class, or decide to engage competing attractive returns. We believe that these portfolio across geographies, industries, firms to manage their assets. A mitigating are best achieved by applying the highest and investment stages1. We also conduct factor is that investment management standards of risk management throughout extensive research before entering agreements with our investors typically the firm in our values, code of conduct, new markets, and regularly monitor offer continuity to AlpInvest for a and personnel management. All of our our portfolio. prolonged period of time. Further, we Managing Directors adopt a hands-on seek to provide robust reporting and approach to operational control and Strategic risks open channels of communication with discipline, monitoring performance, risk, The Board is responsible for setting the investors to ensure that we are responsive quality, and operations as part of their firm’s strategy. Our strategy takes into to their investment needs and portfolio daily responsibilities. Management reports account market and sector developments, considerations as they may change over and review procedures bring all aspects as well as internal and external risk time. In addition, we continuously seek of the business under management factors. Our initial assumptions, however, to diversify and expand our investor supervision, while detailed policies and may be impacted by new events, which base. There is also the risk that senior procedures are in place to help manage could affect the firm’s performance or management expertise may be lost. In risks, encourage consistency, and enable financial position. To help address this order to create a long-term alignment with standardization across the firm. risk, we monitor external trends and AlpInvest, remuneration is based on long- forecasts while consistently reviewing term incentive arrangements. Risk assessment and mitigation strategies our assumptions and tracking the are discussed with our Board. Our performance of our investments. Investment decisions external and internal auditors provide Our ability to source and execute quality further assurance by performing regular Reputational risks investments depends on a number of and ad hoc audits. Our firm and funds may be negatively factors. We need to attract, develop, affected or disrupted by several factors, and retain professionals with the requisite Some of the key risks we face and how such as unenforceable contracts, lawsuits, investment experience and optimize we strive to manage them are described adverse judgments, fraud, and negative the sharing of information and benefits below. Such risks are not intended to publicity. To help reduce the likelihood of from synergies across our investment describe all risks that AlpInvest faces these events, we rigorously assess the teams. In addition, we need to undertake or the risks applicable to our investors, companies and GPs in which we invest thorough assessments of each investment such as the risk of loss of an investor’s to identify unethical practices during the opportunity using our collective knowledge entire investment. These investment risks due diligence process or later through and experience. For that reason, AlpInvest are separately disclosed to investors at interaction with portfolio companies and carefully assesses each fund manager’s the time they commit to an investment GPs. Investing guidelines are stipulated in skills and track record before making an mandate with the firm. all of our mandates. investment commitment. From the initial investment assessment to the finalization of the transaction, AlpInvest employs a methodical process involving the Managing Directors and investment teams.
1 Diversification does not eliminate the risk of loss. GOVERNANCE AND TEAM 18-31 29 /
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ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST and regulatory issues, tax, information technology system failures, business disruption, and internal control weaknesses. Liquidity risks Private equity and mezzanine investments are generally illiquid and require a long-term commitment of capital with no certainty of return. Interests in private equity funds are also often subject legal to and other restrictions resale, on otherwise or may be less liquid than other types of securities, such as publicly traded investors informs AlpInvest securities. forthcomingof liquidity requirements on a timely basis. Our mandate terms are designed help to ensure that we have access at all times sufficient to liquidity fund to our investments. Cash management procedures cash- include flow forecasting and liquidity monitoring. Operational risks AlpInvest is exposed a range to of operational risks that can arise from inadequate or failed systems, processes, and people, as well as external factors that may affect them. These include risks around resources, human legal Credit risk AlpInvest is dependent on funding from its investors. Mandates are in place between the parties that define the amounts minimum investors our commit AlpInvest to for investment purposes. These are subject certain to limitations and are monitored through compliance procedures.
Market riskMarket As an advisory firm, AlpInvest has limited exposure financial to assets. Cash is typically held in short-term deposits with reputable banks, while management companyour has limited exposure adverse to movements in interest rates and foreign exchange rates. typically We seek hedge to foreign currency exposure when providing funds ourto main operating subsidiaries. We haveWe investmentguidelines in place help to address concentration risk, including limits on the interest percentage held in any one fund or portfolio company. Asset allocation is discussed regularly compliance and reports are reviewed quarterly to ensure allocations that fall within these guidelines. Our investment policy is designed to create a diversified portfolio across market segments, geographies, industries, deal sizes, and vintage years. Investment concentration AlpInvest invests across a range of economic sectors jurisdictions. and relationships with fund managers and portfolio companies. management program, we review our investments regularly employ and a rigorous process manage to our decision and the ability of the fund manager or portfolio company drive to performance and achieve its business objectives. As part of ourportfolio The performance of our portfolios depends on a range of factors, including qualitythe investment initial the of Investment performance
GOVERNANCE AND TEAM 18-31 31 / 30 ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST the valuations provided by the GPs were used in combination with our own initial portfolio ongoing and diligence due management. Due the to time lag between receiving reporting the GPs’ the of information and AlpInvest’s reporting date, adjustments valuations to may be made, if necessary. For example, the value of an investment may be adjusted for actual cash flows that occurred from the date of the reported valuations the to financial statement date. The AlpInvest commitment AlpInvest endeavors uphold to the highest standards and mitigate risk in a timely fashion. consistent and are committed We robust strong governance and acrossto the firm and our experience and expertise help us deliver to on this goal. and takes into consideration the specific nature, facts, and circumstances of each investment, including but not limited theto price atwhich the investment was acquired, current and projected operating performance, trading values publicon exchanges comparable for securities, and financingterms currently available. determine To the fair value of our investments in private equity funds,
International (Edition December (Edition 2015, endorsed by Invest Europe), or where required in accordance with StandardsAccounting Topic Codification 820 as prescribed by U.S. Generally Accepted Accounting Principles (‘GAAP’). This requires management’s judgment Valuation standardsValuation In2016, we determined the fair value of our direct and co-investments (equity and mezzanine) based on the Private Capital Equity Venture and GuidelinesValuation AlpInvest’s best judgment, but at its sole discretion. In resolving conflicts, AlpInvest various consider factors, may including the interests of the applicable client with respect the to immediate issue and/or with respect the to client’s longer-term courses of dealing as well as the effect of such conflict or such resolution on AlpInvest and its affiliates. AlpInvest policies also has adopted and procedures address to certain conflicts.identifiable potential for their own account, and providing transaction-related, investment advisory, servicesmanagement, other and to its clients. In the ordinary course of conducting its activities, the interests of a client may conflict with the interests of AlpInvest or other clients.In the case of all real or perceived conflicts of interest, AlpInvest’s determination as whether to an actual conflict of interest exists, which factors are relevant, and the resolution of any such conflicts, will be made using Conflicts of interest AlpInvest and certain of its related entities engage in a broad range of activities, including investment activities
landscape ensure to AlpInvest is in compliance with applicable requirements. Markets. AlpInvest has a team of legal and compliance professionals dedicated to monitoring the legal, tax, and regulatory Directive, AlpInvest holds a license as an alternative fund manager with the Dutch Authority for the Financial portfolio activities. management For example, in order comply to with the Alternative Investment Fund Managers to privateto investment funds and their sponsors may also impose significant administrative burdens on AlpInvest and may divert time and attention from investment funds and their sponsors continues evolve. to Increased scrutiny newlyand proposed legislation applicable Legal, tax, and regulatory risks The regulatory environmentfor private subject an to annual ISAE 3402 Type II audit attest to the to design and operating effectiveness of our internal controls. with a number of these parties. Our investment management process is services, fund administration, depositary services, regulatory reporting services, pensions.and work We with reputable firms and have service-level contracts party service providers support to our operations, insurance, including IT, payroll, services, broker custodian segregation of duties, delegated delegated duties, of segregation authorities, and monitoring at all levels. AlpInvest relies on a number of third- Operational risk management is underpinned by clearly defined roles, RISK MANAGEMENT (CONT’D)
INVESTMENT PERFORMANCE 32-43 33 / 32 ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST Investment performance InvestmentsFund overview Secondary Investmentsoverview Equity Co-Investments overview Mezzanine Co-Investments overview Important information
INVESTMENT PERFORMANCE 34 36 38 39 41 42 INVESTMENT PERFORMANCE1
AlpInvest achieved strong financial Gross and net returns for the total of We believe the performance of our performance again in 2016, continuing our fully committed funds remained in funds underlines the rewarding, long- a history of consistently delivering line with 2015 levels and our net IRR term nature of private equity investing. robust returns to our investors since (internal rate of return) since our inception Looking to the future, the capital that our firm’s inception. 17 years ago has been approximately has already been committed to us by 12% (see page 42 for more detailed our investors allows us to seek new, AlpInvest was pleased with the information on IRR methodology). In Fund attractive investment opportunities and performance of its funds in 2016. Investments, IRR from our Main Fund IV we believe we are well positioned to Through the end of 2016, we received remained stable compared to 2014 at 14% continue to deliver strong returns over €67bn of commitments from our on a net basis. Our Secondary Investments the coming years. We have maintained investors. Our assets under management Main Fund V showed a net IRR of 19%, a disciplined approach to investing, as per December 31, 2016 were €39.3bn a decrease of some 4% over the year. taking advantage of prospects presented in total, of which €24.1bn was for Fund The Co-Investment Main Fund V ended within our chosen markets while being Investments, €9.6bn for Secondary 2016 with a net IRR of 32%, a decrease of mindful of the challenges arising from Investments and €5.6bn for Equity and some 2% over the year. the macroeconomic environment. Mezzanine Co-Investments. 1 Past performance is not indicative of future results or a guarantee of future returns. Return metrics are subject to change as a fund or investment portfolio matures.
J-curve SMOOTH ACTUAL Reuters % Reuters
0
1 YEARS 10
The J-curve in private equity is used to using a mechanism called the internal illustrate the historical tendency of private rate of return, or IRR. This calculates the equity funds to deliver negative returns underlying returns, taking into account in early years and investment gains in money invested, money returned, and later years. Initially, investment returns unrealized investments. After three to five are negative because management years, the interim IRR should provide a fees are drawn from committed capital meaningful guide to the ultimate returns to and underperforming investments are be expected from a specific fund, although identified and written down at an early the period is generally longer for early- stage. In later years, as companies are stage funds. For the AlpInvest mandates, sold, ideally for more than the purchase the IRR generally becomes meaningful price, cash starts to flow to the limited approximately five years after the start of partners. Private equity measures returns the mandate. INVESTMENT PERFORMANCE 32-43
3 35 / 4% 9% 9% 9% 8% 7% NM NM IRR Net Net 11% 11% 41% 34 14% 15% 26% 19% 13% 18% 10% 56% 32% 12% 12% 12% 23% IRR 2016 67.0
3 2015 5% 9% 7% 63.0 NM NM IRR 14% 21% 15% 17% 12% 19% 19% 10% 10% 10% 10% 25% 59% 44% 35% 27% 13% 13% 17% IRR Gross Gross
2014 60.2 998 700 519 1,115 (€m) (€m) 1,122 1,106 5,175 2,760 1,475 1,859 1,090 3,281 2,250 4,877 4,273 5,080 2,000 4,545 11,500 2013 Fund size Fund size 56.8 (€bn) 4 year year 2011 2012 2012 2016 2015 2010 2010 2014 2005 2002 2006 2006 2006 2009 2000 2004 2003 2003 2003 ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST 2012 52.3 Various Various Vintage Vintage 2011 48.9 2010 47.6 2 2009 44.4 1 2008 39.4 unds in the commitment period 2007 32.3 Main Fund V – Secondary Investments Main Fund II – Co-Investments Main Fund III – Co-Investments Main Fund IV – Co-Investments Main Fund V – Co-Investments Main Fund II – Mezzanine Investments Main Fund I – FundInvestments Main Fund II – Fund Investments Main Fund III – Fund Investments Main Fund IV – Fund Investments Main Fund VI – Fund Investments Main Fund VI – Secondary Investments Main Fund VI – Co-Investments All other funds AlpInvest Total Main Fund IV – Secondary Investments Main Fund III – Mezzanine Investments All other funds funds committed fully Total Main Fund V – Fund Investments Main Fund I – Secondary Investments Main Fund II – Secondary Investments Main Fund III – Secondary Investments Total f Life-to-date IRRs Fully committed funds Funds in the commitment period capital commitments received AlpInvest by Total Total capital committed to AlpInvest includes €7.0bn ‘Fully committed funds’ are past the expiration date Returns are not considered meaningful for Main Fund As of December 2016. 31, Past performance is not affiliates), but for which the investment decisions were made by parties other than AlpInvest or its affiliates (€6.7bn was committed before the end of 2002 and €0.2bn before AlpInvest began managing such investments in 2013). Investments, as the commitment period for these funds commenced in 2015 and 2016, respectively. of investor mandates that are managed on behalf of controlled its (or AlpInvest Partners by investors B.V. of the commitment period as defined in the respective partnershiplimited agreement. VI – Fund Investments and Main Fund VI Secondary – returns. Return metrics are subject to change as a fund orinvestment portfolio matures. Please see further for 42 page on disclosures additional the important information regardingAlpInvest’s track record. indicative of future results or a guarantee of future 4 2 3 1 FUND INVESTMENTS OVERVIEW1
2016 fund portfolio activity 2016 new fund commitments2 The Fund Investments team made new commitments to 35 funds with a 2016 Name Segment Relationship4 vintage year (or earlier) for our investors. American Securities Partners VII U.S. Mid-Market Existing Of these, 28 are to funds where a prior Anchor Equity Partners Fund II NTM3 Existing primary fund commitment had been made Apax IX Global LBO Existing with the GP. The other seven represent a Arlington Capital Partners IV U.S. Mid-Market New new relationship. Astorg VI E.U. Mid-Market Existing Axxon Brazil Private Equity Fund III NTM3 New During 2016, 12 commitments were Bencis Buyout Fund V E.U. Mid-Market Existing made to funds that are expected to have a 2017 (or later) vintage. Those 12 funds CBPE Capital Fund IX E.U. Mid-Market Existing are therefore not included in this year’s Fondo Nazca IV, F.C.R. E.U. Mid-Market Existing Annual Review overview. Gilde Buy-Out Fund V E.U. Mid-Market New Growth Fund 3 NTM3 New In 2016, a total of €2.0bn of capital was Hellman & Friedman Capital Partners VIII Global LBO Existing called to fund investments in private Index Ventures VIII Venture Existing equity and mezzanine funds. Inflexion Enterprise Fund IV E.U. Mid-Market Existing Inflexion Supplemental Fund IV E.U. Mid-Market Existing During the year, AlpInvest received Investindustrial VI E.U. Mid-Market Existing €4.5bn of proceeds from investments. Linden Capital Partners III U.S. Mid-Market New Within this figure: Linzor Capital Partners III NTM3 Existing 4% came from the 2000–2002 mandate; Medicxi Ventures Fund I Venture Existing 12% from the 2003–2005 mandate; Montefiore Investment IV E.U. Mid-Market Existing 49% from the 2006–2008 mandate; Nautic Partners VIII U.S. Mid-Market Existing 21% from the 2009–2011 mandate; NewSpring Growth Capital IV Venture Existing 7% from the 2012–2014 mandate; and Norvestor VII E.U. Mid-Market Existing 7% from other mandates. Norvestor VII OS E.U. Mid-Market Existing 1 Including mezzanine and clean tech fund investments. PAG Asia II NTM3 New Parthenon Investors V U.S. Mid-Market New Permira VI Global LBO Existing Quadrant Private Equity No. 5 NTM3 Existing Trivest Growth Investment Fund I U.S. Mid-Market Existing TSG7A U.S. Mid-Market Existing TSG7B U.S. Mid-Market Existing 2 Commitments to funds with a 2016 vintage year (or earlier) for AlpInvest. For illustrative purposes only. References to a particular investment should not be considered a recommendation of any security or investment. There can be no assurance that AlpInvest will be able to invest in similar opportunities in the future. Additionally, AlpInvest committed to four other funds with a 2016 vintage that are not listed by name for confidentiality reasons. 3 Non-traditional markets, which include commitments to mid-market funds outside of Western Europe and the United States. 4 Existing includes funds where a prior primary fund commitment has been made with the GP by AlpInvest. INVESTMENT PERFORMANCE 32-43
3 37 / 16 14 71 25 1% 131 137 128 102 624 36 91% 18% 47% 54% 91% 89% 111% 104% 102% 100% Funds as % of Invested Invested committed
2 3 191 131 593 (€m) 4,515 9,406 1,355 2,885 4,487 11,471 35,039 Capital 5 invested 74 76 12 16 14 56 23 64 335 GPs
2 613 291 250 (€m) 9,998 1,069 4,766 1,202 4,958 4,508 11,323 38,978 Capital ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST committed
4% 4% 2% 565 332 658 21% 15% 12% 10% 32% (€m) 1,106 1,268 4,877 5,080 4,545 100% 11,500 10,853 40,784 amount amount Mandate Mandate committed % of capital of %
4
Buyout and venture capital Clean technology Mezzanine funds Buyout and venture capital other – mandates Buyout and venture capital Buyout and venture capital Buyout and venture capital Buyout and venture capital Buyout and venture capital Buyout and venture capital Investment focus 1 6 7 Mezzanine Total 2003–2005 Global large buyoutGlobal European mid-market mid-market U.S. Non-traditional markets capitalVenture technologyClean Other Total 2012–2014 2015 2016 2007–2012 2000–2014 2003–2016 2000–2002 2006–2008 2009–2011 Underlying fund vintage years 2000–2016. As a GP can have funds in more than one category, the total is larger thanNon-traditional mentioned in the text above. markets, which include commitments to mid-marketThis segment funds comprises outside of Western non-control Europe distressed and the United States. debt and (primary and secondary) funds-of-funds. The Fund Investment Mandate 2000–2002 includes pre-vintage year 2000 commitments made by our investors and historical rates.At exchange foreign Based on foreign exchange rate as per December 2016. 31, Fund InvestmentsFund portfolio overview As per December 2016 31, Vintage years AlpInvest predecessors. overview commitments Fund As per December 2016 31, Segment
4 5 6 7 1 2 3 SECONDARY INVESTMENTS OVERVIEW1
2016 portfolio activity Secondary Investments portfolio overview AlpInvest Secondary Investments As per December 31, 2016 committed €1,322m across nine transactions in 2016, compared with Vintage years Investment Mandate Capital Capital Invested focus amount committed2 invested2 as % of €1,195m across 11 transactions in 2015. (€m) (€m) (€m) committed3 For the 12 months ending December 31, 2016, AlpInvest Secondary Investments 2000–2002 Buyout 519 519 512 100% received proceeds from 109 transactions 2003–2005 Buyout 998 994 951 96% out of 120, totaling €1,313m compared 2006–2008 Buyout 2,250 2,147 2,055 95% with €1,668m received in 2015. 2009–2011 Buyout 1,859 1,806 1,766 97% 2012–2015 Buyout 4,273 4,139 3,405 82% 1 Includes mezzanine secondary investments. 2016–2019 Buyout 3,281 56 14 36% 2002–2015 Mezzanine 429 417 412 95% funds 2003–2016 Other buyout 309 260 204 79% Total 13,918 10,339 9,319 90% 2 At historical foreign exchange rates. 3 Based on foreign exchange rate as per December 31, 2016. INVESTMENT PERFORMANCE 32-43 39 /
38
ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST Dutch holiday park operator Global enterprise-class infrastructure IT and softwaremanagement provider Owner of a fast casual dining restaurant chain in Turkey apparel company headquarteredBranded women’s in Delhi Provider of BPO services to SMEs in the Nordic region and U.K. Provider transportation of infrastructure operations and servicesmaintenance states railroads U.S. and for Supplier of luxury wine predominantly in North America Global provider technology-enabled of efficacy patient data collection solutions for use in clinical research Provider pharmaceutical of services chronically to sick patients Leading operator of auto centers in France and Spain brand fashion menswear Chinese healthcareIntegrated provider insurer and Affordable luxury Parisian fashion label Provider measurement testing services and of life for applied other end-marketsscience and Leading European citrus producer retail grocers for lifestyle of Retailer merchandise serving farm, ranch, and suburban customers in the U.S. solutions containment cost out-of-network Provider of healthcareto insurers Operator substance of abuse treatment clinics and residential across centers fiveU.S. states products including promotional of supplier Value-added apparel, notebooks, hard goods and Description Provider of software for real estate and facility management security providerHome monitoring Wired broadband cable and television services provider to consumers in South India vinyl seller of and windows manufacturer, and Designer, sliding glass doors in the Western U.S. Oct-16 Feb-16 Mar-16 Aug-16 Oct-16 Jul-16 Dec-16 Apr-16 Mar-16 Mar-16 Oct-16 Nov-16 Jul-16 Mar-16 Jul-16 Mar-16 Jun-16 Aug-16 Aug-16 Date of completion of Date Jun-16 Apr-16 May-16 Feb-16
U.S. U.S. U.S. The Netherlands U.S. Turkey India U.S. U.S. France China U.S. France U.K. Spain U.S. U.S. U.S. India U.S. Norway U.S. U.S. Geography
2 1 Consumer Discretionary Consumer Discretionary Consumer Discretionary Consumer Discretionary Technology Information Consumer Staples Consumer Discretionary Healthcare Healthcare Consumer Discretionary Consumer Discretionary Healthcare Consumer Discretionary Healthcare Consumer Discretionary Healthcare Healthcare Telecommunication Telecommunication Services Industrials Technology Information Industrials Sector Technology Information Consumer Discretionary
TCNS Clothing Company SolarWinds DünyasiTavuk Roompot Pinnacle Treatment Polyconcept Mills Fleet Farm MultiPlan LGC Martinavarro GXG HealthSun Isabel Marant ExactCare VertFeu Company eResearch Technology DBi ServicesDBi Duckhorn Wine Cascade Windows Group Cogital ADT Atria Convergence Technologies Accruent For illustrative purposes only. References to a particular investment should not be considered a recommendation of any securityAdditionally, or investment. AlpInvest made two other equity co-investments in 2016 that are not listed by name for confidentiality reasons. Including clean tech co-investments. There can be no assurance that AlpInvest will be able to invest in similar opportunities in the future. Name 2016 new2016 equity co-investments companies. realizations Total in 2016 for our equity co-investment portfolio were €1,318m. equityco-investments. This included €452m in 25 new investments and €29m investments in existing portfolio In 2016, AlpInvest invested €482m in
OVERVIEW EQUITY CO-INVESTMENTS 2 1 EQUITY CO-INVESTMENTS OVERVIEW (CONT’D)
Equity Co-Investments portfolio overview As per December 31, 2016
Vintage years Investment focus Mandate amount Capital invested2 (€m) (€m)
2000–20021 Buyout & venture capital 800 759 co-investments 2003–2005 Buyout co-investments 1,090 925 2006–2008 Buyout co-investments 2,760 2,443 2009–2010 Buyout co-investments 1,475 1,245 2011–2013 Buyout co-investments 1,122 967 2014–2015 Buyout co-investments 1,115 777 2016 Buyout co-investments 167 0 2010–2012 Clean technology 23 21 2002–2016 Buyout co-investments 485 274 – other mandates Total 9,037 7,411 1 The Co-Investment Mandate 2000–2002 includes the investments made by the former Alpinvest N.V. (mainly pre-vintage year 2000). The Co-Investment Mandate 2000–2002 includes Buyout, Life Sciences and Technology investments. Life Sciences and Technology investments were discontinued in late 2003. 2 At historical foreign exchange rates.
3 Portfolio diversification Sectors4 AlpInvest seeks to invest in a broad range of sectors and geographies, creating Real Estate 1% significant diversification in our portfolio. Utilities 2% 21% Consumer From a geographical perspective4, 43% Discretionary of our investments are in Europe 5, 48% Telecommunication 3% Services 11% Consumer Staples in North America and 9% in the rest of 4% Energy the world. The sector breakdown of our Materials 4% equity co-investments since 2000 can be Information 15% 8% Financials found to the right. Technology 13% Healthcare Industrials 18%
3 Diversification does not eliminate the risk of loss. 4 Includes all equity co-investments made by AlpInvest since 2000 (except for Life Science and Technology investments made as part of Mandate 2000–2002). 5 Europe excludes emerging Europe (included in rest of the world). INVESTMENT PERFORMANCE 32-43
3 41 / 81 30 33 88 145 287 850 40 (€m) 1,514 Capital invested
86 33 125 158 148 297 29% Consumer Discretionary 4% Consumer Staples 1% Energy 7% Financials 11% Healthcare 1,200 (€m) 2,047 Description ERP software provider middle-marketto manufacturing, distribution, and automotive retail companies Mandate amount Mandate ALPINVEST ANNUAL REVIEW 2016 REVIEW ANNUAL ALPINVEST Date of completion of Date Sep-16 1 Geography U.S.
Mezzanine co-investments Mezzanine co-investments Mezzanine co-investments Mezzanine co-investments Investment focus Investment Mezzanine co-investments Mezzanine co-investments Mezzanine co-investments Sector Information Technology 2 5 Materials Materials 6% Infomation 15% Industrials Industrials 27% Technology Technology Sectors 2000–2002 2002–2004 2005–2006 2007–2011 2012–2014 2014–2015 Other mandates Total At historical rates.At exchange foreign Mandate 2000–2002 is a legacy portfolio managed for our investors. For illustrative purposes only. References to a particular investment should not be considered a recommendation of any As per December 2016 31, Vintage years 2016 new2016 mezzanine co-investment Name Epicor Software Corporation security or investment. There can be no assurance that AlpInvest will be able to invest in similar opportunities in the future. Mezzanine Co-Investments portfolio overview
3 2 1 , 6
,
5
4
Europe excludes emerging Europe (included in rest of Diversification does not eliminate the risk of loss. Reflects all mezzanine mandates. the world). found the to right. 34% of our investments are in Europe 59% in North America and 7% in the rest of the world. The sector breakdown of our mezzanine co-investments can be of sectors and geographies, creating significant diversification in our portfolio. geographicalFrom a perspective Portfolio diversification AlpInvest seeks investto in a broad range portfolio, of which was €19m due interest to income and €96m realizations. from portfolio company. AlpInvest of cash inflows had €115m fromin 2016 the outstanding mezzanine mezzanine co-investments. This included in one new€16m investment and €12m in a follow-on investment for an existing In 2016, AlpInvest invested €28m in
OVERVIEW MEZZANINECO-INVESTMENTS 6 4 5 IMPORTANT INFORMATION
This document has been prepared by and is being issued The performance of any portfolio investments capital subscriptions to underlying portfolio and distributed in the Netherlands by AlpInvest Partners discussed in this document is not necessarily indicative investments, plus the amount of uncommitted capital B.V. (together with its controlled affiliates, ‘AlpInvest’). of the performance of any other of AlpInvest’s available for investment under the existing mandates This is AlpInvest’s ninth Annual Review and its purpose portfolio investments, and you should not assume of AlpInvest’s investors with investment periods that is to increase the understanding of AlpInvest and to that investments in the future will be profitable or will have not expired. improve communication with our stakeholders. THIS equal the performance of past portfolio investments. DOCUMENT IS NOT INTENDED FOR AND MAY NOT BE In addition, while AlpInvest’s valuations of unrealized As used in this document, a ‘Main Fund’ represents PROVIDED TO “U.S. PERSONS” (AS DEFINED UNDER investments and projected performance are based on (i) an investment mandate (and the private equity REGULATION S OF THE U.S. SECURITIES ACT OF 1933, assumptions that AlpInvest believes are reasonable investments made thereunder) in respect of a noted AS AMENDED), WHICH INCLUDES U.S. RESIDENTS under the circumstances, the actual realized returns strategy or strategy segment (i.e. Primary Funds, AND ENTITIES ORGANIZED UNDER THE LAWS OF on AlpInvest’s investments will depend on, among Secondaries and Co-Investments), as the case may THE UNITED STATES. other factors, future operating results, the value of the be, of each of AlpInvest’s two largest advisory clients assets and market conditions at the time of disposition, on a pooled basis which mandates have coinciding The Walker Guidelines, as published by the British any related transaction costs and the timing and investment periods and (ii) other advisory client Private Equity and Venture Capital Association (‘BVCA’), manner of sale, all of which may differ from the mandates (including commingled fund clients) are one of the prominent initiatives on increased assumptions on which the valuations and projections with investment periods that fall within the relevant disclosure and it is our intention to follow these used herein are based. Accordingly, the actual realized investment period under the mandates for AlpInvest’s guidelines as a basis for our report. We are advocates return on any such investments may differ materially two largest advisory clients (but do not overlap with of transparency and believe that the private equity from the results indicated herein. Furthermore, more than one such investment period). Mezzanine industry will benefit from more open communication investors may contact AlpInvest representatives to Main Funds include mezzanine investments across with all stakeholders. We have tried to be as open as discuss the procedures and methodologies used to all strategies (i.e. Primary Funds, Secondaries and possible in this Annual Review. However, some areas calculate the investment returns and other information Co-Investments). remain subject to legal confidentiality clauses between provided herein. Investors should consider the content AlpInvest, our investors, or the parties we invest in and of this document in conjunction with investment fund The performance information of all ‘Other Funds’ invest with. Some types of information could also be quarterly reports, financial statements and other includes Main Fund VII – Fund Investments, Main Fund I commercially sensitive. As a result, we are not able to disclosures regarding the valuations and performance – Co-Investments, Main Fund VII – Co-Investments, disclose publicly all of the information we provide to of the specific investments discussed herein. Main Fund I – Mezzanine Investments, Main Fund IV our investors. – Mezzanine Investments, Main Fund V – Mezzanine Certain the information contained in this presentation Investments, all ‘clean technology’ private equity This document is not intended to be (and may not be constitutes “forward-looking statements” that are investments and all other investors whose investments relied on in any manner as) legal, tax, investment, inherently unreliable and actual events or results may are not reflected in a Main Fund. accounting or other advice or as an offer to sell or differ materially from those reflected or contemplated a solicitation of an offer to buy any securities of any herein. None of AlpInvest or any of its representatives The gross annualized internal rates of return (‘IRR’) investment product or any investment advisory service, makes any assurance as to the accuracy of those provided herein are calculated based on actual including any limited partnership or comparable predictions or forward looking statements. AlpInvest investment cash flows up to and including December limited liability equity interests in any fund, managed expressly disclaims any obligation or undertaking to 31, 2016 and the December 31, 2016 fair market account or other similar investment vehicle or product update or revise any such forward-looking statements. value (‘FMV’) of the relevant Main Fund. Gross IRRs sponsored by AlpInvest (each, a “Fund”). Any such The views and opinions are those of AlpInvest as of and multiples of capital invested do not reflect offer or solicitation may only be made pursuant to the date hereof and are subject to change based on management fees or performance fees (carried such Fund’s final confidential private placement prevailing market and economic conditions and will not interest) charged by AlpInvest or any other Main memorandum and/or the related subscription be updated or supplemented. Fund-level expenses that are borne by investors in documents, which will be furnished to qualified the Main Fund, which will reduce returns and in the investors on a confidential basis at their request for Certain information contained herein has been aggregate are expected to be substantial. The FMVs their consideration in connection with such offering. obtained from third-party sources. Although AlpInvest of Main Funds that make Primary Fund Investments This document may contain proprietary, trade-secret, believes such sources to be reliable, AlpInvest makes or Secondary Investments are based on the latest confidential and commercially sensitive information. no representation as to its accuracy or completeness. available valuations of the underlying limited partnership interests (in most cases as of September References to any portfolio investment are intended AlpInvest is part of The Carlyle Group (“Carlyle”). 30, 2016), as provided by their general partners. to illustrate the application of AlpInvest’s investment An information barrier has been erected between The FMVs for Main Funds that make Equity and process only and should not be used as the basis AlpInvest and the rest of Carlyle that restricts certain Mezzanine Co-Investments are based on AlpInvest’s for making any decision about purchasing, holding information from being shared, including information internal valuations. or selling any securities. Nothing herein should be regarding AlpInvest portfolio investment decisions. interpreted or used in any manner as investment All investment programs managed by AlpInvest are Net IRR provided herein is based on the gross advice or a recommendation of any security or intended to operate in accordance with the information calculation and is net of management fees and investment strategy. The information provided about barrier protocols and supplemental compliance performance fees charged by AlpInvest as well as any portfolio investments is intended to be illustrative, procedures specific to Carlyle’s Investment Solutions Main Fund-level expenses. To eliminate the effect of and is not intended to be used as an indication of business segment of which AlpInvest is a part. currency rate changes, all non- EUR cash flows and the current or future performance of AlpInvest’s fair market values have been converted to EUR using portfolio investments. AlpInvest Partners B.V. is included in the public the foreign exchange rate as of December 31, 2016. register kept by the Dutch Authority for the Financial No cash-flow projections have been used to calculate There is no assurance that a Fund’s investment Markets (Autoriteit financiële markten), in accordance any of the performance numbers provided herein. objective will be achieved or that investors will receive with section 1:107 of the Dutch Act on Financial To AlpInvest’s knowledge, there are no established a return on their capital. The recipient must consult Supervision (Wet op het financieel toezicht), as holder standards for the calculation of IRRs for private equity its own legal, accounting and tax advisors as to the of a license to manage alternative investment funds portfolios. The use of another methodology would be legal, business, tax and related matters concerning under license number 15001833. expected to result in a different, and possibly lower, the information contained in this document in order to IRR. Investors should be aware of the significant make an independent determination and consequences The amount of AlpInvest’s assets under management differences between private equity and public markets of a potential investment in a Fund, including federal, (‘AUM’) is calculated on the basis of the latest available regarding their portfolio/index constituents and state, local and foreign tax consequences. valuations of all portfolio investments for which specific risk/return characteristics. AlpInvest provides continuous and regular supervisory or management services adjusted for interim cash flows up to the relevant reporting date, plus unfunded INVESTMENT PERFORMANCE 32-43PERFORMANCE INVESTMENT
ALPINVEST ANNUAL REVIEW 2016 42/43 CONTACT
Amsterdam AlpInvest Partners B.V. Jachthavenweg 118 1081 KJ Amsterdam The Netherlands Phone: +31 20 540 7575 Fax: +31 20 540 7500
New York AlpInvest US Holdings, LLC 299 Park Avenue 35th Floor New York, NY 10171 United States of America Phone: +1 212 332 6240 Fax: +1 212 332 6241
Hong Kong AlpInvest Partners Ltd 701 Champion Tower 3 Garden Road Hong Kong Phone: +852 2878 7099 Fax: +852 2878 7009
Indianapolis AlpInvest US Holdings, LLC 201 North Illinois Street Suite 1530 Indianapolis, IN 46204 United States of America Phone: +1 317 361 4436