Industry Developments & Macro-Economic Overview 4th Annual European Fund Finance Symposium

Christopher Elvin - Head of Private Equity Products - Preqin Gavin Friend – Senior Market Strategist - National Australia Bank

www.preqin.com

Clients include over 60,000 industry professionals from 16,000 firms

Multi award-winning service

Data available via online databases, publications and research reports

Guangzhou

Hong Kong

Singapore

London New York San Francisco

Manila

Private Equity & Venture Capital | Hedge Funds | Real Estate | Infrastructure | Private Debt | Natural Resources

About Preqin

www.preqin.com

527 522 577 647 708 779 893 923 1001 1065 1197

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17

AUM

($bn

)

Global Private Capital AUM by Geographic Focus

North America Europe Asia ROW

Global Private Capital AUM Has More than Doubled Over The Past Decade – $5.2tn (Europe - $1.2tn)

0

200

400

600

800

1000

1200

1400

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17

AUM

($bn

)

Europe Focused Private Capital AUM by Asset Class

Private Equity Real Estate Infrastructure Private Debt Natural Resources

www.preqin.com

66 81 114

137 176 164 201 217 113

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011 2012 2013 2014 2015 2016 2017 2018 H1

Aggr

egate

Cap

ital R

aised

($bn

)

Private Capital Fundraising by Geographic Focus

North America Europe Asia Rest of World

Stellar Fundraising Continues - $862bn Raised Globally in 2017. European Fundraising ($113bn) Dominated by $1bn+ Funds

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011 2012 2013 2014 2015 2016 2017 2018 H1

Aggr

egate

Cap

ital R

aised

($bn

)

Europe-Focused Private Capital Fundraising by Fund Size

Up to $250mn $251mn - $500mn $501mn - $750mn $751mn - $999mn >$1bn

www.preqin.com

-400

-200

0

200

400

600

800

1000

1200

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Capit

al Ca

lled/D

istrib

uted (

$bn)

Global Private Capital Net Cash Flows, 2000 to 2017

Called Up Distribution Net Cash Flow

Net Cash Flows to LPs remain Positive….but signs of slowdown

In 2014, 2015 and 2016 net cash flows to LPs in excess of $200bn each year

Still positive in 2017, but signs of slowdown - $114bn.

www.preqin.com

Purchase Prices at Record Levels but Fund Managers Continue to Deploy Capital - $358bn in 2018 YTD

0 50 100 150 200 250 300 350 400 450 500

0 500

1000 1500 2000 2500 3000 3500 4000 4500 5000

2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

Aggr

egate

Dea

l Valu

e ($b

n)

Numb

er of

Dea

ls

Global PE Buyout Deal Activity

Number of deals Aggregate Deal Value (USD bn)

www.preqin.com

237 224 297 322

326 365

403 451

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Jun-18

Dry P

owde

r ($b

n)

Private Capital Dry Powder by Geographic Focus

North America Europe Asia Rest of World

Dry Powder Continues to Grow - $1.8tn Globally.

•  $451bnindrypowderavailabletoEurope-focusedfunds

www.preqin.com

Over 11,000 Institutional Investors Active in Alternatives Today

2008–3,500investors 2018–11,000+investors

www.preqin.com

79% of Institutional Investors Active in Alternatives, 50% with Exposure to Three or More Asset Classes

www.preqin.com

Alternatives Have Long Track Record of Adding Yield: Expectations Continue to be High

0%

5%

10%

15%

20%

25%

1Year 3Years 5Years 10Years

FixedIncome HedgeFundsListedEquity PrivateEquityTotalInvestmentPortfolio

Median Public Pension Fund Net Returns by Asset Class (as of 31 Dec 2017)

10%

34%

9% 16%

9%

26%

71%

50%

75% 57% 78%

57%

19% 16% 16% 27%

13% 17%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Private Equity Hedge Funds Real Estate Private Debt Infrastructure Natural Resources

Investor Views On Portfolio Performance Over Last 12 Months

Fallen Short of Expectations Met Expectations Exceeded Expectations

www.preqin.com

17%

45%

47%

59%

0% 10% 20% 30% 40% 50% 60% 70%

No Benefits

Competitive Advantage

Reduce Administrative Burden

Cash Flow Management

Proportion of Respondents

Perceived Benefits of Fund Credit Facilities

LPs’ Views on Fund Credit Facilities

10%

14%

15%

22%

27%

42%

59%

0% 10% 20% 30% 40% 50% 60% 70%

Legal Risk

Tax Considerations

No Concerns

Clawback Issues

Liquidity Risk

Additional Expense

Fund Performance Comparability

Proportion of Respondents

Concerns Regarding Fund Credit Facilities

www.preqin.com

Increasing Transparency for LPs

•  PreqinhasbeencollectingdataonwhichprivatecapitalfundsareusingacreditfacilitysinceQ42017.

•  Ofthe9,898funds

whichPreqinhastransparentreturnsdatafor–37%haveprovidedacreditfacilityuse‘status’.

20%13%

23% 25%25% 22%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015 2016 2017

%ofFun

ds

Vintage

Credit Facility Use By 2012 – 2017 Vintage Buyout Funds

Notused-mayuseatalaterdate

Notused-noplanstouse

Yes-Creditfacilityused

Notdisclosed

Unknown

A Five Year Outlook

www.preqin.com

Preqin Predicts Alternative Assets to Grow to $14tn by 2023 as a Result of Investor Demand

$3.1tn

$6.5tn

$8.8tn

$14.0tn

2008 2013 2017 Preqin's2023Projection

Alternative Assets Industry Total AUM

2% 16% 15%

2% 7% 17%

20%

57%

31%

36% 24%

66%

79%

27%

54% 62%

70%

17%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Private Equity Hedge Funds Real Estate Private Debt Infrastructure Natural Resources

Investors’ Projected Change in Allocations over the Next Five Years

Decrease Stay the Same Increase

www.preqin.com

Private Equity Growth to Outstrip Hedge Funds

www.preqin.com

Private Debt Will be Even More Important in 2023

§  AUMhasdoubledsincethestartofthedecade

§  Expectedtodoubleagainoverthenext5years

www.preqin.com

Routes to Market in the Next 5 Years

13%25%

39%

24%

42%34%

45%15%

28%

11%

17%

4%

FundManager

Investor FundManager

Investor FundManager

Investor

PooledFunds SeparateAccounts Co-investments

RoutestoMarket

Increase Decrease

§  84%ofinstitutionalinvestorsplantoincreasetheirallocationtoalternativesinthenextfiveyears

§  Managersmaybeoverestimatingtheshiftoutofpooledfunds

§  Agreementontheopportunityintheco-investmentspace

T h e H o m e o f A l t e r n a t i v e s