2012 Global Private Equity Report Contents

Editors Foreword Section One: The 2012 Preqin Global Private Equity Report Keynote Address - Moose Guen, CEO, MVision Section Two: Overview of the Private Equity Industry Introduction - The Year Ahead - Helen Kenyon, Preqin Overcoming the Challenges - Mark Florman, Chief Executive, BVCA Emerging Markets: Room to Grow - Sarah Alexander, President and CEO, EMPEA Moving Forward on Shifting Sands - Steve Judge and Bronwyn Bailey, PEGCC Reputation and Regulation: Changing the Face of Private Equity - Drte Hppner, Secretary-General, EVCA Section Three: Assets under Management, Dry Powder, Employment and Compensation Assets under Management and Dry Powder Employment and Compensation Section Four: General Partners League Tables - Largest GPs Buyout GPs - Key Stats and Facts Distressed PE GPs - Key Stats and Facts Growth GPs - Key Stats and Facts Mezzanine GPs - Key Stats and Facts Natural Resources GPs - Key Stats and Facts Venture GPs - Key Stats and Facts Section Five: Fundraising Weathering the Storm: How to Maintain the GP/LP Relationship in Tough Times - Tripp Brower, Partner, Capstone Partners 31 21 25 26 27 28 29 30 17 19 11 12 13 14 15 7 5 Evolution of Fundraising Market in 2011 Overview of Current Fundraising Market North American Fundraising European Fundraising Asia and Rest of World Fundraising Buyout Fundraising Distressed PE Fundraising Growth Fundraising Mezzanine Fundraising Natural Resources Fundraising Venture Fundraising Section Six: Placement Agents Overview of Placement Agent Use in 2011 Profile of the Placement Agent Industry Section Seven: Fund Administrators Fund Administrators Section Eight: Fund Auditors Fund Auditors Section Nine: Deals Talking Deals - Vineet Pruthi, Senior Managing Director, Lincolnshire Management Overview of PE-Backed Buyouts and Exits Make-up of PE-Backed Buyout Deals in 2011 by Type, Value and Industry Most Active Debt Providers and Deal Advisors Largest PE-Backed Buyouts and Exits Section Ten: Performance Examination of Private Equity Performance Private Equity Horizon Returns Consistent Performing Fund Managers Private Equity Returns for Pension Funds Private Equity Benchmarks 65 69 70 73 74 55 56 60 62 63 53 51 47 49 34 37 38 39 40 41 42 43 44 45 46

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2. Overview of the Private Equity Industry

Section Eleven: Investors Overview of Limited Partner Universe Make-up of Investors in Recently Closed Funds Investor Appetite for Private Equity in 2012 December 2011 LP Survey Results League Tables - Largest Investors by Region League Tables - Largest Investors by Type Investors to Watch in 2012 Section Twelve: Investment Consultants Investment Consultants in Private Equity Section Thirteen: Fund Terms and Conditions Mid-Market Focus - Sam Kay, Investment Funds Partner, Travers Smith Overview of Fund Terms and Conditions Investor Attitudes towards Fund Terms and Conditions - December 2011 LP Survey Results Sample of 25 Leading Law Firms in Fund Formation Section Fourteen: Sovereign Wealth Funds Sovereign Wealth Funds Investing in Private Equity Section Fifteen: Cleantech Cleantech Fundraising Market in 2011 Cleantech Funds in Market Overview of Private Equity Cleantech Fund Managers Investors in Cleantech Funds Section Sixteen: Funds of Funds Review of Private Equity Funds of Funds Fund of Funds Managers - Key Stats and Facts Fundraising Review - Funds of Funds 107 108 110 103 104 105 106 101 93 94 97 91 77 79 81 87 88 89

Listed Private Equity Funds of Funds Section Seventeen: Secondaries Review of the Secondary Market and Investor Appetite in 2012 Perspectives on the Secondary Market Franois Gamblin, CEO, Secondcap Secondaries Intermediaries Secondaries GPs - Key Stats and Facts Fundraising Review - Secondaries Section Eighteen: Preqin Products Order Forms

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113 116 118 119 120

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2. Overview of the Private Equity Industry

Moving Forward on Shifting Sands

- Steve Judge, Interim President and CEO, PEGCC - Bronwyn Bailey, Vice President of Research, PEGCC
One year ago, the PEGCC wrote about a number of legislative challenges facing private equity. Many of the debates over tax policy and regulatory reform anticipated in early 2011 continue today. We expect that additional financial regulations affecting private equity will be finalized this year and the industry will continue to face key battles in the area of tax policy. Congressional efforts to reduce the public debt and increase US competitiveness will expedite a comprehensive review of tax policy, and policymakers will debate various ways to finance tax reforms. However, the context of these debates will likely change due to increased scrutiny of the industrys business practices, resulting from a Presidential contest that includes a candidate who was a successful private equity general partner. Throughout these discussions, the PE industry will need to aggressively promote the value of its investments. The Politics of Private Equity The political discourse around financial regulations and tax policy will likely be shaped by the upcoming elections. For the first time in US history, a founder of a major private equity firm has become a front-runner for the Republican Presidential nomination. As a result, the scrutiny of Mr. Romneys past career has put the business model of the entire private equity industry under a political microscope. The increased attention to the industry will likely heighten uncertainty around regulators and legislators decisions on issues important to private equity. The result will be a more challenging environment to promote the interests of the private equity industry in the regulatory and tax policy discussions anticipated for 2012. Regulatory Issues Regulatory actions in the Dodd Frank Act moved forward in 2011 on multiple fronts. The private equity industry made progress to reduce the burdens of certain proposed rules but other significant challenges remain. One notable positive development is that the SEC will only require private equity fund advisers to file requested information on Form Private Fund (Form PF) annually within 120 days of the end of the fiscal year, rather than quarterly within 15 days of the end of the quarter as originally proposed. The SECs final Form PF rule also removed several requirements that would have been unworkable and unnecessary for private equity advisers. Finally, the SEC changed the threshold for a large private fund adviser for private equity advisers to $2bn from $1bn in AUM. A number of other financial regulations have yet to be finalized. Proposed Volcker Rule regulations released in October might impact the ability of private equity firms to raise capital from certain groups of investors, including non-US banking entities, insurance companies general and separate accounts, banksponsored customer funds, and bankaffiliated pension plans. Another critical regulatory issue is the Financial Stability Oversight Councils second proposed rule on designation of certain non-bank financial companies as systemically important financial institutions (SIFIs), which would subject them to capital requirements. The PEGCC has provided comments on both regulatory proposals. Tax Reform Two issues on the Congressional agenda watched closely by investors, ratings agencies and the public will be reducing the federal deficit and fundamental tax reform. In the context of these discussions, at least three specific policy areas are of interest to private equity. While it is not guaranteed that any of these proposals will move forward, the PEGCC plans to engage actively on all three areas in 2012. 1. Taxation of Flow-Through Entities Some have suggested that imposing an entity level tax on flow-through entities, such as business partnerships, would help to reduce tax rates on C corporations, i.e. corporations with no limit on the number of shareholders. The PEGCC strongly opposes such a proposal for the following reasons: (1) Under current tax law, partnerships pay one level of tax and C corporations pay two levels of tax. The solution that adds simplicity to the current tax code is to revise the law so all forms of business are subject to only one level of taxation, instead of requiring double taxation on more enterprises. (2) Based on estimates from Ernst & Young, flow-through businesses would see their tax burden rise by 8% ($27bn) per year under budget neutral, corporateonly tax reform. This added burden on many companies that are the engines of job creation would hinder economic growth. 2. Interest Deductibility The tax treatment of interest on corporate debt is also likely to come under scrutiny this year as a potential source of additional revenue to finance a lower corporate tax rate. Reducing the deductibility of interest would decrease incentives for corporations to finance expansion and capital investment with debt. Although private equity firms and funds generally have little to no leverage, many private equity portfolio companies do utilize debt in their operations. The PEGCC believes that reforming the tax code in this manner would have negative consequences for US businesses, capital markets and economic growth. 3. Carried Interest President Obama and some Congressional Democrats continue to advocate taxing carried interest as ordinary income, rather than as long-term capital gains. Last fall, the bipartisan Joint Select Committee on Deficit Reduction (a.k.a. the supercommittee) could not find a compromise solution for filling a $1.2tn deficit gap over the next 10 years. Some Democrats and Republicans may continue to seek alternative deficit reduction plans in 2012 that could implicate the tax treatment of carried interest as a revenue source. During this election year, the PEGCC will continue to correct misconceptions and to provide facts about the industry, while also pushing forth the views of the private equity industry on issues related to tax and regulatory reform. The year 2012 will be an exciting and challenging one for our organization and the industry.

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3. AUM, Dry Powder, 2. Overview Employment of the Private and Equity Compensation Industry

Employment and Compensation

Number of Active Private Equity Firms The fall in fundraising over the past three years has affected the number of new firms entering the private equity market to raise a fund for the first time. Fig. 3.5 shows the number of new fund managers joining the sector each year (calculated using the vintage of their first fund to represent their year of establishment). Any firms that have not raised a fund in the past 10 years are considered to have become inactive. At the height of the fundraising boom in 2007 a large number of firms were establishing private equity funds for the first time. More than 450 new firms joined the sector in that year, the highest number of any year. Since then, however, the number of firms raising a fund for the first time has fallen significantly, with only around 150 new firms in 2011 as of November. (The 2011 figure only includes firms that have reached one or more interim closes on their debut funds in order to begin making investments.) With a number of firms becoming inactive due to last having raised a fund 10 years ago, this means that the total number of active firms in the industry has remained at a similar level to 2010, at around 4,500 managers. When analyzing the number of firms over time by fund type and geographic location, it is clear that a significant proportion of the firms dropping out of the industry were venture capital firms that last raised funds in the tech bubble and have since been unable to raise further capital from investors. Employment Levels at Private Equity Firms When private equity firms that do not raise, or have not yet raised, distinct private equity funds (i.e. those that manage corporate or personal capital and those that manage third-party capital without pooling into commingled private investment vehicles) are included, the total number of active firms under consideration increases from the 4,500 previously mentioned to more than 7,500. In total, these firms employ an estimated 85,000 people. It is important to note that our estimate here constitutes the core Fig. 3.5: Number of Active Private Equity Firms over Time (by Vintage of First Fund Raised)
5,000 4,500 4,000

Number of Firms

3,500 3,000 2,500 2,000 1,500 1,000 500 0

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

New

Existing

Fig. 3.6: Average Number of Employees by Firm Assets under Management

250 231.6

200 Average No. of Staff

150

100

86.8

85.8

Average No. of Staff per $1bn AUM

50 9.2 0
Less than $250mn

43.7 15.5
$250-499mn

31.2 22.0

38.0 20.8 12.6

$5-9.9bn

10.5
$10bn or More

$500-999mn

of the industry, taking into consideration firms managing capital committed by institutional and other large investors. Beneath this lies a further tranche of smaller firms that invest lesser sums of capital, raising money from private sources. Economies of Scale The number of employees at private equity firms naturally varies significantly

$1-4.9bn

with the assets under management of the firms in question, as Fig. 3.6 shows. Firms with less than $250 mn in assets under management have an average of 9.2 employees, while firms with more than $10 bn in total assets employ an average of more than 230 people. However, the larger firms tend to have far fewer employees per $1 bn in assets under management than the smaller firms, thus benefiting from economies of scale when it comes to charging

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2. Overview of the Private 4. General Equity Industry Partners

Fig. 4.3: Annual Private Equity Capital Raised: New vs. Existing GPs
100% 90%

Proportion of Total Capital Raised

80% 70% 60% 50% 40% 30% 20% 10% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 27% 22% 13% 16% 14% 14% 13% 14% 15% Capital Raised by New GPs 73% 78% 87% 84% 86% 86% 87% 86% 85% Capital Raised by Existing GPs

Fund Manager Profiles is the industrys leading source of profiles and data on private equity fund managers. It contains detailed profiles for over 6,200 fund managers specializing in buyout, venture capital, mezzanine, distressed debt and other private equity investments, and includes more than 23,000 key contacts at these firms. To find out more, please visit:

www.preqin.com/fmp

Year of Final Close

Fig. 4.4: Buyout - 20 Largest GPs by Total Funds Raised in Last 10 Years
Total Funds Raised in Last 10 Years ($bn)* 44.2 43.9 42.5 41.6 33.0 31.6 29.1 24.8 24.1 20.7 20.5 18.0 16.4 15.9 15.7 14.4 14.1 13.4 13.1 12.8

Fig. 4.5: Buyout - 20 Largest GPs by Estimated Dry Powder

Estimated Dry Powder ($bn)* 15.8 11.4 9.1 9.0 8.9 8.5 7.6 7.1 6.6 6.5 6.3 4.8 4.5 4.4 4.3 4.1 4.0 3.6 3.6 3.4 Firm Headquarters US US UK US UK US US US US Sweden US US UK UK US US US US UK US

Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Firm Name Blackstone Group TPG Carlyle Group Kohlberg Kravis Roberts CVC Capital Partners Bain Capital Goldman Sachs Apollo Global Management Apax Partners Hellman & Friedman Advent International Permira Providence Equity Partners BC Partners EQT Partners JC Flowers & Co Silver Lake 3i Charterhouse Capital Partners Bridgepoint Capital

Firm Headquarters US US US US UK US US US UK US US UK US UK Sweden US US UK UK UK

Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Firm Name Blackstone Group Carlyle Group CVC Capital Partners Hellman & Friedman BC Partners Goldman Sachs TPG Bain Capital Advent International EQT Partners Kohlberg Kravis Roberts Berkshire Partners Bridgepoint Capital Charterhouse Capital Partners Silver Lake Apollo Global Management Summit Partners TA Associates Montagu Private Equity Lindsay Goldberg

* All tables exclude funds of funds and secondary funds of funds

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The 2012 Preqin Global Private Equity Report - Sample Pages

2. Overview of the Private 4. General Equity Industry Partners

Growth GPs Key Stats and Facts

Fig. 4.26: Breakdown of Growth Firms by Number of Funds Raised Fig. 4.27: Number of Firms Actively Managing Growth Funds by Country
GP Headquarters
6% 2% 1 Fund 31% 2-3 Funds 61% 4-5 Funds

No. of Firms 87 56 39 26 21 15 14 12 12 9

US China India UK Hong Kong France Singapore Italy South Korea Australia

6 Funds or More

Fig. 4.28: Growth Firms Industry Preferences for Underlying Investments

60% 50% 40% 30% 22% 20% 10% 0%
Telecoms, Media and Communications Information Technology Food and Agriculture Consumer Discretionary Business Services Energy and Utilities Health Care Industrials Materials Real Estate

Fig. 4.29: Breakdown of Growth Firms by Maximum Equity Investment Size

70% 66%

48% 45% 40% 43% 44% 40%

Proportion of Firms

60% 50% 40% 30% 20% 14% 10% 4% 0% $0-50mn $51-100mn $101-500mn > $500mn 17%

17%

16% 6%

Proportion of Firms

Maximum Equity Investment Size

Fig. 4.30: 10 Largest Growth Funds Raised of All Time

Fund Citigroup International Growth Partnership II Technology Crossover Ventures VII Baring Asia Private Equity Fund V 3i Growth Capital Fund CDH China Fund III Citigroup International Growth Partnership Baring Asia Private Equity Fund IV TPG Star Shanxi Energy Industry Investment Fund CDH China Fund IV Firm Name Citi Venture Capital International Technology Crossover Ventures Baring Private Equity Asia 3i CDH China Management Company Citi Venture Capital International Baring Private Equity Asia TPG China Science & Merchants Capital Management CDH China Management Company Year Closed 2008 2007 2011 2010 2007 2005 2008 2008 2009 2010 Fund Size (bn) 4.3 USD 3.0 USD 2.5 USD 1.2 EUR 1.6 USD 1.6 USD 1.5 USD 1.5 USD 10.0 CNY 1.5 USD GP Location UK US Hong Kong UK China UK Hong Kong US China China

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The 2012 Preqin Global Private Equity Report - Sample Pages

2. Overview of the Private Equity 5. Fundraising Industry

Overview of Current Fundraising Market

As of the start of 2012 there are a record 1,814 funds in market targeting aggregate capital commitments of $744.2bn. These figures represent a 14% increase in the number of funds on the road and a 24% increase in the aggregate capital sought from the beginning of 2011. Fig. 5.9 shows that the beginning of 2012 marks the first rise in aggregate capital sought since 2009, when 1,624 funds were targeting a record $888.4bn in aggregate capital. The January 2012 figure of 1,814 funds on the road is a new record for the private equity industry. Fig. 5.10 reveals that buyout funds are seeking the largest amount of capital of all fund types, with $177.4bn being targeted by 230 vehicles. In terms of aggregate capital sought, this represents a substantial 81% increase from the $98.0bn targeted by 180 funds in January 2011. Real estate funds are seeking the second largest amount of capital from the highest number of funds, with $164.5bn sought by 450 vehicles. Aggregate capital targeted by real estate funds in market has increased by 18% from one year ago, and the number of funds on the road has risen by nearly 5%. Regional Focus As shown in Fig. 5.11, 798 primarily North America-focused funds are seeking $348.3bn in capital commitments. This is a 21% rise from the $288.5bn targeted by 713 North America-focused funds in January 2011. The aggregate capital sought by primarily Europe-focused funds has increased by 38% to $197.1bn from the beginning of 2011, and there has been a marginal rise in the number of funds, from 389 in January 2011 to 412 at the start of 2012. Recent data highlights the fact that the fundraising climate is especially challenging at present, with a record number of funds currently on the road competing for capital commitments from an investor community that remains cautious about making new private equity investments. However, it is also worth noting that 40% of private equity funds currently seeking capital have already achieved at least one interim close, having secured commitments totalling $126.7bn towards their fundraising targets, which demonstrates that there is still a flow of capital commitments entering the marketplace.

For the second consecutive year, Asia and Rest of World-focused vehicles outnumber their European counterparts. There are currently 604 funds focused primarily on Asia and Rest of World targeting an aggregate $198.8bn, reflecting increases of 23% and 17% respectively on January 2011 figures. Within this category, Asia makes up the Fig. 5.9: Private Equity Funds in Market over Time, 2008 - 2012 greatest proportion, with 379 funds in 2,000 1,814 market targeting 1,800 $123.3bn in 1,624 1,594 1,561 aggregate capital. 1,600 Latin America- 1,400 1,304 No. Funds Raising focused funds 1,200 are targeting the second highest 1,000 888.4 amount of capital, 800 744.2 705.0 698.5 $21.5bn, and funds Aggregate Target 601.8 ($bn) targeting the Middle 600 East and Israel are 400 seeking a combined 200 $15.7bn.
0 January 2008 January 2009 January 2010 January 2011 January 2012

Fig. 5.10: Composition of Current Fundraising Market by Fund Type

500 450 400 350 300 250 200 150 100 50 0
Venture Buyout Fund of Funds Infrastructure Growth Distressed PE Real Estate

Fig. 5.11: Composition of Current Fundraising Market by Fund Primary Geographic Focus
900

450 800 370 No. Funds Raising 700 600 230 164.5 177.4 144 93.2 54.6 59.4 48.8 66 47.6 60 27 20.0
Secondaries

798

604 No. Funds Raising 412

194

500 185 Aggregate Target ($bn) 60 29.8

Other

400 300 200 100 0

348.3 Aggregate Target ($bn) 197.1 198.8

21.6 28 27.3
Mezzanine Natural Resources

North America

Europe

Asia and Rest of World

Primary Geographic Focus

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The 2012 Preqin Global Private Equity Report - Sample Pages

2. Overview of the Private 10. Equity Performance Industry

Private Equity
Benchmarks
Fund Type: Buyout Geographic Focus: All Regions Vintage 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 No. Funds 7 21 28 51 46 65 61 35 26 19 24 51 36 36 33 19 24 27 16 17 10 19 Called (%) 4.0 20.0 39.2 47.7 71.1 88.9 93.9 92.2 98.5 99.5 96.0 97.2 99.3 100.0 100.0 98.0 100.0 100.0 100.0 100.0 100.0 100.0 Median Fund Dist (%) Value DPI (%) RVPI 0.0 30.5 0.0 94.5 0.0 104.1 5.1 95.8 14.2 99.5 16.0 94.0 42.6 85.8 83.6 83.1 114.4 58.6 164.4 28.0 179.1 18.9 164.3 21.8 138.8 6.9 143.8 0.5 160.6 0.0 179.9 0.0 137.2 0.0 188.7 0.0 201.5 0.0 207.4 0.0 246.5 0.0 214.7 0.0 Benchmark Type: Median As At: 30 Jun 11 Multiple Quartiles (X) Q1 n/m 1.07 1.25 1.30 1.32 1.30 1.60 2.13 2.45 2.24 2.75 2.29 2.03 1.84 2.14 2.36 2.18 2.47 2.88 3.22 3.65 3.42 Median 0.30 0.97 1.09 1.10 1.20 1.15 1.35 1.67 1.79 1.92 1.97 1.84 1.55 1.48 1.61 1.81 1.37 1.89 2.02 2.08 2.47 2.15 Q3 n/m 0.91 0.99 0.94 1.01 1.04 1.18 1.27 1.46 1.28 1.51 1.52 1.12 0.98 1.10 0.77 1.14 1.51 1.38 1.56 2.02 1.38 Q1 n/m n/m n/m 21.9 14.7 11.9 16.6 27.3 33.3 38.3 43.3 26.0 17.1 17.2 22.3 22.6 30.0 36.3 23.2 37.6 49.0 29.4 IRR Quartiles (%) Median n/m n/m n/m 6.9 8.5 6.4 10.1 16.9 18.3 25.7 24.7 20.7 12.1 8.7 8.7 16.9 9.7 22.6 16.7 21.2 25.3 19.5 Q3 n/m n/m n/m -2.4 1.1 1.6 6.0 11.2 9.6 7.8 13.9 12.0 6.3 -2.5 1.3 -3.3 2.3 11.0 7.7 7.9 20.2 9.3 IRR Max/Min (%) Max n/m n/m n/m 45.7 54.5 28.0 76.9 81.7 59.0 72.0 94.1 57.5 37.4 31.3 84.0 147.4 59.9 92.2 58.0 60.6 54.7 72.0 Min n/m n/m n/m -23.8 -30.0 -29.1 -12.1 -7.8 -60.4 -2.0 6.1 4.6 -25.1 -100.0 -19.1 -8.9 -8.6 -1.4 0.8 -49.9 -0.5 2.4

Fund Type: Buyout by Fund Size Geographic Focus: All Regions

Benchmark Type: Median

Mega Buyout Large Buyout Mid-Market Buyout Small Buyout Median Fund Weighted Fund Median Fund Weighted Fund Median Fund Weighted Fund Median Fund Weighted Fund Vintage Multiple IRR Multiple IRR Multiple IRR Multiple IRR Multiple IRR Multiple IRR Multiple IRR Multiple IRR (X) (%) (X) (%) (X) (%) (X) (%) (X) (%) (X) (%) (X) (%) (X) (%) 2010 n/m n/m n/m n/m 0.94 n/m 0.96 n/m 0.92 n/m 0.89 n/m 0.97 n/m 0.91 n/m 2009 1.06 n/m 1.07 n/m 1.03 n/m 1.06 n/m 1.02 n/m 1.09 n/m 1.06 n/m 1.07 n/m 2008 1.00 -0.3 1.09 5.2 1.15 15.9 1.09 13.3 1.04 4.1 1.03 5.6 1.13 9.9 1.17 9.1 2007 1.14 5.6 1.08 2.5 1.14 8.2 1.13 7.5 1.19 9.9 1.18 6.6 1.13 8.1 1.12 7.2 2006 1.10 2.8 1.07 0.8 1.21 7.5 1.14 5.0 1.15 6.6 1.17 5.8 1.19 7.7 1.15 3.7 2005 1.45 10.4 1.48 10.0 1.31 7.7 1.33 11.7 1.28 8.1 1.33 9.5 1.41 14.2 1.54 18.0 2004 1.63 12.3 1.75 18.5 1.43 17.0 1.38 20.7 1.65 13.5 1.81 21.7 1.57 14.9 1.60 16.6 2003 1.89 29.5 2.06 29.6 1.99 19.1 2.06 19.1 1.62 12.5 1.67 14.5 1.64 11.3 1.67 18.5 2002 1.97 32.5 1.91 27.8 1.90 22.5 1.83 19.7 1.55 17.3 1.58 16.4 1.80 18.5 1.82 21.6 2001 2.12 28.9 2.39 30.8 1.90 25.8 2.10 26.6 2.00 24.6 2.14 26.5 1.98 33.4 2.04 25.1 2000 1.86 18.2 1.91 18.4 1.63 13.5 1.64 13.0 1.97 21.0 1.91 20.2 1.97 17.9 1.89 16.4 1999 1.84 14.7 1.73 10.7 1.51 1.2 1.46 2.0 1.62 10.1 1.76 12.1 1.37 14.5 1.38 10.5 1998 1.45 5.9 1.42 5.0 1.38 8.1 1.33 1.9 1.39 7.1 1.39 2.2 1.62 11.4 1.67 10.8 1997 1.62 9.9 1.41 5.7 1.64 11.8 1.78 18.0 1.10 1.5 1.12 2.3 1.58 9.9 1.42 7.8 Definition used for Mega, Large, Mid-Market, Small Buyout: Vintage 1992-1996 Vintage 1997-2004 Vintage 2005-2011 Small $200mn $300mn $500mn Mid $201-$500mn $301-$750mn $501-$1,500mn Large > $501mn $751-$2,000mn $1,501-$4,500mn Mega > $2,000mn > $4,500mn

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11. Investors

Investor Appetite for Private Equity in 2012

2011 has been another challenging year for fundraising, and the number of funds reaching a final close over the course of the year has remained low; 616 funds closed having raised an aggregate $265.6bn in commitments over the course of the year. However, there have been signs of improvement; our conversations with investors have revealed that the vast majority of LPs are seeking new opportunities and many are picking up the pace of their commitments. Preqin interviewed 100 prominent investors from around the world in December 2011 to find out about their attitudes towards the current private equity market and their plans for investment in the asset class going forward. Investor Appetite in 2011 Two-thirds of investors we spoke to made new commitments over the course of 2011, which is an increase from the 58% of investors that had made new commitments over the course of 2010 in a similar study conducted at the same time last year. Furthermore, as Fig. 11.11 illustrates, a third of investors committed more capital in 2011 than they did in 2010, and 27% committed the same amount over the course of 2011 as they did in 2010. Although 28% of investors slowed the pace of new commitments in 2011 compared to 2010, it is worth noting that 12% of investors that made new commitments in 2011 did not invest in any new funds in 2010, suggesting an increase in overall investor appetite for committing to new funds. Forty-nine percent of investors are currently at their targeted level of exposure to the asset class, as Fig. 11.12 demonstrates, and 16% are above their target allocation. Over a third (35%) of LPs are currently below their target allocations to private equity; therefore the majority of investors are likely to continue to make new commitments to private equity funds in order to build or maintain their level of exposure to the asset class. One Danish investor we spoke to that is below its target allocation commented: [We] have had a hesitant PE program Fig. 11.11: Amount of Capital Investors Committed in 2011 Compared to 2010
Significantly More Capital in 2011 than in 2010 Slightly More Capital in 2011 than in 2010 18% Same Amount of Capital in 2011 as in 2010 Slightly Less Capital in 2011 than in 2010 27% Significantly Less Capital in 2011 than in 2010 Did Not Invest in 2010 but Investing in 2011

12% 11%

15%

17%

Fig. 11.12: Proportion of Investors At, Above or Below Their Target Allocations to Private Equity
100% 90% 13% 19% 16%

Proportion of Respondents

80% 70% 60% 50% 40% 30% 20% 10% 0% Dec-2010 Jun-2011 Dec-2011 33% 36% 35% Below Target Allocation 54% 45% 49% At Target Allocation Above Target Allocation

for the last three years and so have a lot of dry powder to invest at the moment. Investors Returns Expectations Fig. 11.13 shows that 95% of investors expect their private equity investments to achieve returns above their public market benchmark. Sixty-three percent of investors expect returns of more than 400 basis points over the public markets from their private equity portfolio and a further quarter of investors expect

returns of 200-400 basis points above public market returns. On the whole, investors have been satisfied with the returns their private equity investments have achieved. As Fig. 11.14 illustrates, three-quarters of investors feel their private equity fund investments have met their expectations, and a further 6% feel that their private equity investments have exceeded their expectations. Many investors have adjusted their expectations in light of

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Name Private Equity Real Estate Infrastructure All Titles (33% Saving!) 1 Copy $175/95/115 $175/95/115 $175/95/115 $350/190/230 2 Copies (10% saving) $315/170/205 $315/170/205 $315/170/205 $630/340/410 5 Copies (25% saving) $655/355/430 $655/355/430 $655/355/430 $1,310/710/860 10 Copies (35% saving) $1,135/620/750 $1,135/620/750 $1,135/620/750 $2,270/1,240/1,500 Data Pack* (Please Tick)

Shipping Costs: $40/10/25 for single publication $20/5/12 for additional copies

(Shipping costs will not exceed a maximum of $60 / 15 / 37 per order when all shipped to same address. If shipped to multiple addresses then full postage rates apply for additional copies)

DIGITAL: Completed Forms:

Post (address to Preqin): One Grand Central Place 60 E 42nd Street Suite 2544, New York NY 10165 Equitable House 47 King William Street London, EC4R 9AF Asia Square Tower 1 #07-04 8 Marina View Singapore 018960 303 Twin Dolphin Drive Suite 600 Redwood City CA 94065 Fax: +1 440 445 9595 +44 (0)870 330 5892 +65 6407 1001 Email: info@preqin.com Telephone: +1 212 350 0100 +44 (0)20 7645 8888 +65 6407 1011 +1 650 632 4345
Name Private Equity Real Estate Infrastructure All Titles (33% Saving!) Single-User Licence $175/95/115 $175/95/115 $175/95/115 $350/190/230 Enterprise Licence** $1,000/550/660 $1,000/550/660 $1,000/550/660 $2,000/1,100/1,320

If you would like to order more than 10 copies of one title, please contact us for special rate.
Data Pack* (Please Tick)

* Data Pack Costs: $300/180/185 for single publication **Enterprise Licence allows for unlimited distribution within your firm.

Payment Details:
Cheque enclosed (please make cheque payable to Preqin) Credit Card Visa Amex Please invoice me Mastercard

Shipping Details:
Name: Firm: Job Title: Address:

Card Number: Name on Card: Expiration Date: City: Security Code: Post/Zip: Country: Telephone: Email:
American Express, four digit code printed on the front of the card. Visa and Mastercard, last three digits printed on the signature strip.