Baxon Breakfast Seminar: ‘Navigating in uncertain times: An outlook on H1 Private Equity activity‘

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Global Private Equity Outlook April 2016

Navigating in Uncertain Times Challenges and Opportunities

London, 28th April 2016

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The long term pictureQ1 2016 - turbulent times A word about Private DebtChallenges and Opportunities for GPs and LPsOperational Excellence & Transparency

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Private Equity: Buyout, Venture, Growth, Turnaround, Secondaries, Fund of Funds, Other core PEPrivate Capital: PE + Private Debt + Private Real Estate + Infrastructure + Natural ResourcesDefinitions

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Follow The Money LPs PE Return ExpectationsSource: Preqin 2016 H1 Investor Outlook

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Private Capital Returns PrEQIn Index 2000 - 2015Source: Preqin 2016 Global PE & VC Report

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Private Capital Returns PrEQIn Index 2000 - 2015Source: Preqin 2016 Global PE & VC Report

+ / - 400 BP p.a.

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Returns by Asset Class Pension FundsSource: Preqin 2016 Global PE & VC Report; median returns for pension funds by asset class

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Returns by Asset Class Pension FundsSource: Preqin 2016 Global PE & VC Report; median returns for pension funds by asset class

+ / - 400 BP p.a.

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LP Satisfaction with PE ReturnsSource: Preqin Investor Outlook H1 2016

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Long Term Allocation IntentionsSource: Preqin Investor Outlook H1 2016

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Private Capital AUM, 2000 - 2015Source: Preqin 2016 Global PE & VC Report

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LPs Below / On / Above Target PE AllocationSource: Preqin 2016 Global PE & VC Report

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Private Capital Calls & Distributions, 2000 2015Source: Preqin 2016 Global PE & VC Report; 2015 is estimate based on H1 annualized

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Private Capital Net Cash Flows for LPs, $bnSource: Preqin Asia PE Report November 2015; Preqin PE Online

Net CallNet Dist

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LPs Expected Commitments 2016 vs. 2015Source: Preqin Investor Outlook H1 2016

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Global Private Capital Fundraising Final + Interim Closes QlySource: Preqin 2016 Global PE & VC Report

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Global Private Equity Fundraising Final + Interim Closes QlySource: Preqin 2016 Q1 PE Quarterly

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Private Equity Funds on RoadSource: Preqin 2016 Q1 PE Quarterly

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Global Buyout & Growth Deals, 2006 - 2016Source: Preqin Buyout Deals Analyst

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Global Buyout & Growth Deals, 2006 - 2016Source: Preqin Buyout Deals Analyst

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What Has Changed? Market Volatility and Credit SpreadsSource: St Louis Federal Reserve - US High Yield B Option-Adjusted Spread

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Global Buyout Deal Value vs. US Credit Spreads, 2006 2016Q1Source: Preqin deals data; Fed Reserve credit spread data (BofA Merrill Lynch US High Yield B Option-Adjusted Spread)

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Where Are We Now?Source: St Louis Federal Reserve - US High Yield B Option-Adjusted Spread

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How Well-Positioned is PE to Weather A Potential Storm?

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1: Reasonable Discipline Post-GFC

Source: Preqin Performance Analyst database

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2: Performance of PE During / Post GFCSource: Preqin Performance Analyst database

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2: Performance of PE During / Post GFCSource: Preqin Performance Analyst database

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Fundraising Outlook - 2016

Negative Factors

Reluctance to commit at time of uncertaintyEvidence of stabilizing appetite during 2015?Positive Factors

PEs track recordPE Relatively well-positionedCommit now to invest at lower valuations

?

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Fundraising Outlook - 2016

Negative Factors

Reluctance to commit at time of uncertaintyEvidence of weakening appetite during 2015?Positive Factors

PEs track recordPE Relatively well-positionedCommit now to invest at lower valuations

2016 will probably prove to be an OK / Good vintage But, suspect its likely to be a tougher year for fundraising

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To summariseWe have seen a difference in the expected LP commitments versus what has really been happening in Q1 2016

PE has been significantly more active in paying cash out to LPs than in the run-up to the GFC

And has also been significantly more cautious in calling money up for new investments . . .

So the aggregate portfolio is significantly more mature than at the time of the start of the GFC

Hence we can expect it to be correspondingly more robust

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Private Debt

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Global Private Debt Fundraising by YearVintage YearNumber of FundsAggregate Capital Raised (bn)Average Fund Size(mn)Q1 201615$7.8$5892015134$89.5$7282014137$76.0$6082013157$81.1$5552012104$63.4$661201196$46.2$531201089$40.9$499

Global Private Debt Fund Raising by Year

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rflanders (r) - Continued growth in private debt over the last five years. Off to a slow start in 2016... A result of high dry powder? Low M & A? European Private Debt Fundraising by YearVintage YearNumber of FundsAggregate Capital Raised (bn)Average Fund Size(mn)Q1 20164$4.1$1377201534$30.9$997201446$24.5$544201339$19.7$548201226$18.2$727201118$12.6$701201017$6.0$397

European Private Debt Fundraising by Year

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Europe Focused Direct Lending Fundraising by YearVintage YearNumber of FundsAggregate Capital Raised(bn)Average Fund Size(mn)Q1 20162$1.1-201516$18.8$1346201417$13.2$778201315$8.5$61020126$3.5$58420112$1.1$55020105$2.9$716

Europe Focused Direct Lending Fundraising by Year

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rflanders (r) - Direct lending has been the main driver for growth within European private debt. Again Q1 is below pace for prior years, also a result of high dry powder?Challenges & Opportunities

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Private Equity Funds on RoadSource: Preqin 2016 Q1 PE Quarterly

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Challenges & Opportunities for GPs- 1: CompetitionSource: Preqin LP Survey Q1 2016

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Challenges & Opportunities for GPs- 2: Factors of Importance to LPs1Source: Preqin LP Survey Q1 2016(1) Which of the following characteristics are most important in identifying a superior fund manager?

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Challenges & Opportunities for GPs- 2: Factors of Importance to LPs1Source: Preqin LP Survey Q1 2016(1) Which of the following characteristics are most important in identifying a superior fund manager?

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Challenges & Opportunities for GPs- 3: Operational ExcellenceSource: Preqin LP Survey Q1 2016

(1) Which are the most important features or areas of operational excellence in a firm?

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Challenges & Opportunities for GPs- 3: Operational ExcellenceSource: Preqin LP Survey Q1 2016

(1) Which are the most important features or areas of operational excellence in a firm?

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Key TakeawaysLong term, excellent prospects for Private Equity, Private Debt and other Private CapitalTurbulence / volatility means 2016 may well be tough, but funds will get raisedLPs increasingly demanding on:GP team qualityHistory of strong returnsOperational ExcellenceAlignment of interest with GPsWhat can Baxon Solutions help you with?Operational excellence . . . to help differentiate you in the eyes of your current and prospective LPsDeliver insights on how you have added value to portfolio companies(And increase your control and cost-effectiveness)

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Key TakeawaysLong term, excellent prospects for Private Equity, Private Debt and other Private CapitalTurbulence / volatility means 2016 may well be tough, but funds will get raisedLPs increasingly demanding on:GP team qualityHistory of strong returnsOperational ExcellenceAlignment of interest with GPsWhat can Baxon Solutions help you with?Operational excellence . . . to help differentiate you in the eyes of your current and prospective LPsDeliver insights on how you have added value to portfolio companies(And increase your control and cost-effectiveness)Actionable

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Baxon contribution on Operational Excellence Better client service: Faster response to LP queriesAbility to provide data in LP preferred Excel templates with no additional effortData quality:Portfolio information traceable support by formal sign off processGolden source of data across all the organization Compliance:Valuation frameworks, LP reports and ESG reporting continuously updated to meet regulations and guidelinesTimeliness:Valuation process reduced to 2 weeks Monitoring process in 2-3 weeksRisk assessment:Constant automatic aggregation of portfolio exposure Risk indicators and early warning alerts

More transparent, robust and efficient portfolio management

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Thank You!Further information from Baxon Solutions Further information / reports available from Preqin

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