PREQIN SPECIAL REPORT: PRIVATE EQUITY FUNDS …

1 PREQIN SPECIAL report : PRIVATE EQUITY FUNDS OF FUNDS . NOVEMBER 2017. alternative assets. intelligent data. PREQIN SPECIAL report : PRIVATE EQUITY FUNDS OF FUNDS . FOREWORD. T he PRIVATE EQUITY fund of FUNDS market has changed significantly over the last decade. While most of the PRIVATE EQUITY industry has grown substantially over the last 10 years, FUNDS of FUNDS have faced challenges, with fundraising totals remaining considerably below the levels seen during the peak years of 2007 and 2008. As the PRIVATE EQUITY industry has evolved and the sophistication of investors has increased, the fund of FUNDS model has come under increasing scrutiny.

2 PRIVATE EQUITY fund of FUNDS managers have had to respond by adapting their businesses and investment approaches. By merging with or acquiring other firms, changing their business models and making increased use of alternative investment methods such as separate accounts and co-investments, fund of FUNDS managers have tried to create opportunities for themselves through gaining scale or becoming more specialized. In this report , we examine the current state of the industry and how fund of FUNDS managers have adapted to this new environment. Key findings include: A Challenging Environment: While most of the PRIVATE EQUITY industry has seen significant growth over the past decade, investor concerns about fees and the efficacy of the fund of FUNDS model mean that fundraising levels remain considerably below those seen before the Global Financial Crisis of 2007-2008.

3 A Changing Industry: In the face of these challenges, PRIVATE EQUITY fund of FUNDS managers are taking a number of different approaches in order to remain competitive: attempting to gain scale through consolidation, changing their fee structures or targeting new investment niches. The Continuing Relevance of FUNDS of FUNDS : Significant challenges remain for PRIVATE EQUITY fund of FUNDS managers as they seek to adapt to these changing conditions, but the industry continues to play an important role for many investors. We hope that you find this report useful and welcome any feedback you may have. For more information about how PREQIN 's data can help you, please visit or contact p3 Key Facts p4 A Challenging Environment p7 A Changing Industry p10 The Continuing Relevance of FUNDS of FUNDS PRIVATE EQUITY ONLINE.

4 PRIVATE EQUITY Online is PREQIN 's flagship online PRIVATE EQUITY information resource and encompasses all of PREQIN 's PRIVATE EQUITY and venture capital databases, with unrivalled data and intelligence on all aspects of the asset class, including fund terms and conditions, fundraising, fund managers, institutional investors, fund performance, deals and exits and more. Constantly updated by our teams of dedicated researchers strategically located in industry centres around the globe, PRIVATE EQUITY Online represents the most comprehensive source of industry intelligence available today. All rights reserved. The entire contents of PREQIN SPECIAL report : PRIVATE EQUITY FUNDS of FUNDS , November 2017 are the Copyright of PREQIN Ltd.

5 No part of this publication or any information contained in it may be copied, transmitted by any electronic means, or stored in any electronic or other data storage medium, or printed or published in any document, report or publication, without the express prior written approval of PREQIN Ltd. The information presented in PREQIN SPECIAL report : PRIVATE EQUITY FUNDS of FUNDS , November 2017 is for information purposes only and does not constitute and should not be construed as a solicitation or other offer, or recommendation to acquire or dispose of any investment or to engage in any other transaction, or as advice of any nature whatsoever.

6 If the reader seeks advice rather than information then he should seek an independent financial advisor and hereby agrees that he will not hold PREQIN Ltd. responsible in law or EQUITY for any decisions of whatever nature the reader makes or refrains from making following its use of PREQIN SPECIAL report : PRIVATE EQUITY FUNDS of FUNDS , November 2017. While reasonable efforts have been made to obtain information from sources that are believed to be accurate, and to confirm the accuracy of such information wherever possible, PREQIN Ltd. does not make any representation or warranty that the information or opinions contained in PREQIN SPECIAL report : PRIVATE EQUITY FUNDS of FUNDS , November 2017 are accurate, reliable, up-to-date or complete.

7 Although every reasonable effort has been made to ensure the accuracy of this publication PREQIN Ltd. does not accept any responsibility for any errors or omissions within PREQIN SPECIAL report : PRIVATE EQUITY FUNDS of FUNDS , November 2017 or for any expense or other loss alleged to have arisen in any way with a reader's use of this publication. 2 PREQIN Ltd. 2017 / DOWNLOAD DATA PACK: KEY FACTS. $26bn Amount secured by PRIVATE 17. PRIVATE EQUITY FUNDS of FUNDS $357mn The average size of PRIVATE $381bn The size of the PRIVATE EQUITY EQUITY FUNDS of FUNDS closed in are currently in market, EQUITY FUNDS of FUNDS closed in fund of FUNDS industry.

8 2016, a post-crisis high. targeting an aggregate 2016. $80bn LOCATION OF ACTIVE PRIVATE EQUITY fund OF FUNDS MANAGERS. 141. 33. 21. 18. 15 13. 6 5 5 5 5 5 5 4 4 4 4. US. China Germany UK. Switzerland France Spain Denmark Italy Japan Luxembourg Norway South Africa Australia Canada Hong Kong Singapore 3. alternative assets. intelligent data. PREQIN SPECIAL report : PRIVATE EQUITY FUNDS OF FUNDS . A CHALLENGING. ENVIRONMENT. FUNDRAISING IS LOWER THAN A 2008, it remains under half of the $55bn increase; however, the rest of the PRIVATE DECADE AGO raised by 160 PRIVATE EQUITY FUNDS of FUNDS EQUITY market has grown by 81% over the The PRIVATE EQUITY fund of FUNDS industry in 2007.

9 Same period (Fig. 3). has faced significant challenges over the past decade. While the PRIVATE EQUITY As a result, FUNDS of FUNDS have come INCREASING INVESTOR. industry as a whole has seen sustained to represent a considerably smaller SOPHISTICATION. growth in the years since the Global proportion of the overall market. PRIVATE This challenging environment for PRIVATE Financial Crisis, fundraising by PRIVATE EQUITY FUNDS of FUNDS made up 18% of EQUITY FUNDS of FUNDS has partly been EQUITY fund of FUNDS managers has not PRIVATE EQUITY FUNDS closed in 2007 and driven by investors' reconsideration of the increased in line with the wider industry.

10 Accounted for 15% of capital raised; by costs and benefits of the fund of FUNDS The scale of the challenge is highlighted in 2016 these figures had fallen to 10% and model and the increasing prominence of Fig. 1, which shows the annual fundraising 7% respectively, and stand at 9% and 4% alternative methods of accessing the asset by these vehicles since 2000. Eighty-four in 2017 YTD (Fig. 2). Since December 2008, class. PRIVATE EQUITY FUNDS of FUNDS closed in the overall assets under management 2016, raising approximately $26bn; while (AUM) of PRIVATE EQUITY FUNDS of FUNDS Traditionally, FUNDS of FUNDS have played this is the largest sum raised in a year since has grown from $266bn to $381bn, a 43% a crucial role in helping investors access Fig.