Accessing Private Equity + SRS Portfolio 24 Oct 2021
Ordinary investors, like you and me, always have difficulty accessing private equity.
The closest "access" retail investors have is the Astrea Private Equity Bonds, which was launched by Azalea, with Astrea IV being the first retail bond and Astrea VI being the latest issuance in March this year.
A local start up, Xen, tried to offer private market funds to investors, but wasn't really successful in doing so in adding quality funds to its offering.
Another local startup, Addx (formerly known as iSTOx), tried to help accredited investors break into private markets (note: not just private equity), with a few interesting offerings this year but the scale at this moment is still small.
The most successful global startup is actually Moonfare, who was started by former KKR executives and was able to offer access to very high quality funds. Accredited investors can access these PE Funds from as low as Euro 50,000 but the catch, which most investors didn't realise, is that they call 25% of the capital up front as a buffer. While this is more to protect themselves from default risk, it unfortunately drags down the IRR for the investors.
Similarly for investors, the worry is that should any of the start ups above fail, what would happen to their investments, which are long dated investment products.
Over the weekend, my relationship manager from DBS texted me about a PE fund offering called Altrium II. This PE fund is managed by Azalea, a wholly owned subsidiary of Temasek and by the same company that introduced the PE Bonds to investors. I have been a fan of their PE Bonds and now I can finally access their equity product!
The minimum ticket size is US$250,000 and the amount will be called over 5 years. The best part is actually, unlike most PE funds, there is a well-defined exit and thus, a shorter investment hold of 10 years.
By investing with an entity that is ultimately owned by Temasek, it eliminates the worry that the startup will go belly up and you get to access the PE funds which are frankly, difficult to access for small investors. Definitely this piques my interest and I will be attending their webinar to find out more and I understand the offering will close in a month's time. If you are keen, you may want to find out more from your DBS RMs.
Well, I have provided you some ways in which you can access private equity above, which usually generates an IRR in the teens, but do read the fine print for any other fees which you may have to pay to these intermediaries and platforms.
SRS Portfolio - 24 Oct 2021
I have no additions to the SRS portfolio, which is frankly frustrating, as I was caught up with work and deadlines. With the recovery of REIT prices, the positions in Frasers Centrepoint Trust and Suntec turned positive but this was dragged down by the losses in OTS Holdings.
Over the week, Suntec reported a 20.8% rise in Q3 DPU to $0.02232, which was driven by 2 newly acquired assets in London and the completion of an asset in Melbourne. The distribution will be paid on Nov 29.
The SRS portfolio is sitting on cash of $191,012.
Happy SRSing!
How's your assessment on Altrium II fund?
ReplyDeleteWorth putting some money in to get exposure to PE but don’t like the fees that DBS is charging 🤣
DeleteHi Mr IPO, does DBS offer leverage / financing for this PE fund?
DeleteUnfortunately no…. But you can borrow using other assets with them I guess.
DeleteDid you decide to subscribe to this PE fund?
DeleteYes. Going to subscribe.
DeleteMay you share what is the min investment sum for this fund?
DeleteMinimum is $250,000 USD
DeleteI read the brochure and it mentioned that only 10% of this commitment will be drawn immediately. The rest of it will be spread across time
ReplyDeleteThey will draw between 10-25% each year, depending on how the underlying funds draw. The committed amount should be drawn over 5 years.
DeleteWould DBS requires the entire commitment (say US$250K) to be locked in up front?
ReplyDeleteYou can fund it annually as and when the capital are called, so it is not locked up. Having said that, it is important to have the cash available as the penalty for not funding the call is high, including forfeiture of prior contributions.
DeleteWill we be allocated based on our commitment? Not sure how the allocation is being managed in "over-subscription" situation?
ReplyDeleteUsually for closed ended funds, they will be able to manage it better. Should be able to allocate in full
DeleteNot sure if the sales charges (or any of the charges) etc especially from DBS is negotiable? 1% sales charge on the commitment sum is a substantial sum
ReplyDeleteProbably not negotiable unless you are a super big investor or you can access the manager directly and bypass DBS 🤣
DeleteHi Mr IPO, can you advise on the potential return of this PE investment vs like Astrea VI bonds on leverage with DBS? As I understand that with leverage, Astrea VI bonds can almost reach 10% return per year. So I am not decided if I should invest (given the charges) and if decides to, how much?
ReplyDeleteMy view is this… if you can get 10% from Astrea VI bonds, go for it. It is more liquid than PE and you get deployed immediately. 😊
DeleteIf you are not familiar with private equity, just try some to learn say $250k. This $250k will be drawn down annually over 4-5 years and the amount drawn should generate you an IRR of 10-15%, after the DBS fees. I am projecting a higher end of return as their fund I is doing really and PE can give those returns if they have access to the top performing managers. My own view is DBS RMs are not familiar with this asset class. You probably would have walked away much clearer if you attend the webinar by Azalea. If you invest in large sums, you might as well write in directly to them and see if they accept you and cut out all the middle man fees that does nothing… 😂
Just want to confirm my understand of what it meant by IRR of 10-15% here. Let me cite a simplistic example and see if this is correct. If I placed $100 at the start, and based on net IRR of 15%, will it be correct to say that I will get back $115 at the end of year 10?
ReplyDeleteAssuming your $100 is used entirely for investments and not used to pay for fees and expenses and you get back the money after year 6, then the returns will be 100x(1.15)^6. In other words, it will compound at 15% for 6 years.
DeleteNot sure if there are any interest in this blog but if there is sufficient interest, I can do a write up on Altrium PE Fund II 😎