HarbourVest Global Private Equity Ltd Capital Markets Presentation 8 JUNE 2017 CONFIDENTIAL
Contents > Chairman’s Introduction > Global Markets Review 2017 > Portfolio Construction > Long Term Performance > Financial Performance & Portfolio Highlights > Key Take-Aways > Appendix: Managers and Investments CONFIDENTIAL 1
Chairman’s introduction HVPE is a FTSE 250 investment company with a market capitalisation of £1 billion > Launched in December 2007 > Invests in and alongside HarbourVest funds > Targets consistently strong NAV growth over the long term > Offers a ready-made global private markets programme HVPE Net Asset Value Growth ($ millions except per share data) $1,475 ( ▲ 10%) 1,600 ( ▲ 6%) $1,337 ( ▲ 10%) $1,266 1,400 ( ▲ 15%) $1,167 ( ▲ 9%) 1,200 $1,030 1,000 800 $18.47 600 $16.75 NAV per Share $15.86 NAV per Share 400 $14.38 NAV per Share $12.46 NAV per Share 200 NAV per Share 0 2015 2014 2016 2013 2017 Reflects data as of 31 January of each year. Past performance is no guarantee of future returns CONFIDENTIAL 2
GLOBAL MARKETS REVIEW JUNE | 2017
Global Markets Review 2017 > Reflections on the current macro environment > Global private equity perspective 2016 / 2017 > Private markets outlook CONFIDENTIAL 4
Global Markets Review 2017 > Reflections on the current macro environment > Global private equity perspective 2016 / 2017 > Private markets outlook CONFIDENTIAL 5
Near-term global economic outlook remains benign Real GDP Growth Forecasts Composite PMI, Year-on-Year Change 2016 2017F 2018F Mar 2015 Mar 2016 Mar 2017 6.0% 58 PMI score >50 indicates positive output and 56 5.0% employment intentions 54 4.0% 52 3.0% 50 2.0% 48 1.0% 46 0.0% 44 US Eurozone UK Emerging Global Eurozone UK US Emerging Global Markets Markets Source: Real GDP Growth Forecasts: IMF, as of April 2017; Composite PMI: Bloomberg, as of March 31, 2017 CONFIDENTIAL 6
Economic data continues to surprise on the upside Citi Economic Surprise Index 60 Data ahead of expectations 50 40 30 20 10 0 expectations Data below -10 -20 -30 2014 2015 2016 2017 Citigroup Economic Surprise Index tracks how economic data are faring relative to expectations: the index rises when economic data exceed economists’ consensus estimates and falls when data come in below estimates Source: Bloomberg, as of April 25, 2017 CONFIDENTIAL 7
Equity valuations look ‘priced to perfection’ Equity Market Valuations – EV / FWD EBITDA MSCI Europe MSCI World S&P 500 10-Year Avg SPX 10-Year Avg MXEU 10-Year Avg MXWO 14.0x 13.0x 12.0x +30% 11.0x +21% 10.0x +17% 9.0x 8.0x 7.0x 6.0x 5.0x 4.0x ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 Source: Bloomberg, as of March 31, 2017 CONFIDENTIAL 8
Politics clouds the horizon Getty Images CONFIDENTIAL 9
Global Markets Review 2017 > Reflections on the current macro environment > Global private equity perspective 2016 / 2017 > Private markets outlook CONFIDENTIAL 10
Global private equity market summary 2016 > Liquidity flows moderated, but absolute levels still attractive > LPs seek to maintain / increase private equity exposure > Investment activity declined from 2015 peak, to levels consistent with post-GFC average > Industry performance sustains the argument CONFIDENTIAL 11
GPs have taken advantage of attractive exit conditions Global Private Equity-Backed Exits by Region EV / FWD EBITDA of MSCI World Index US Europe Asia EM MSCI World Index 14x $600 12x $450 $345 $290 10x $300 $150 8x $82 $67 $0 6x ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 Q1 ’16 Q1 ’17 Source: Bloomberg, Thomson Reuters, AVCJ, APER, EMPEA, supplemented by HarbourVest market insights CONFIDENTIAL 12
Record liquidity to investors well in excess of capital calls Portfolio Cash Flows ’05 - ’08 cycle ’09 - ’12 cycle ’13 - ’16 cycle $6.1 billion in distributions $6.7 billion in distributions $12.6 billion in distributions (0.7x capital called) (1.1x capital called) (2.5x capital called) 1,200 3.5x 3.0x 800 2.5x 400 $ Millions 2.0x 1.5x 0 1.0x -400 0.5x -800 0.0x Q1 ’05 Q1 ’06 Q1 ’07 Q1 ’08 Q1 ’09 Q1 ’10 Q1 ’11 Q1 ’12 Q1 ’13 Q1 ’14 Q1 ’15 Q1 ’16 Q1 ’17 Distributions Capital Calls Distributions / Capital Calls Reflects cash flows from primary investments made by HarbourVest-managed funds and accounts; see notes 2 and 3 Past performance is no guarantee of future returns CONFIDENTIAL 13
LP liquidity has supported a $1 trillion fundraising cycle Private Equity Funds Raised by Region ’05 - ’08 cycle ’09 - ’12 cycle ’13 - ’16 cycle $1.1 trillion raised $517 billion raised $1.0 trillion raised 400 40% 300 30% $ Billions 200 20% 100 10% $67 $35 0 0% ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 Q1 ’16 Q1 ’17 US Buyout Europe Buyout US Venture Asia EM % Buyout Funds >$5B Source: Thomson Reuters, Incisive Media, and HarbourVest analysis of Asia from AVCJ, APER, EMPEA, and GP reporting CONFIDENTIAL 14
GPs have used exit markets to lock in returns Portfolio IRR at Cycle End DPI at Cycle End US Buyout Europe Buyout US Buyout Europe Buyout 35% 35% 0.33x 30% 28% 30% 25% 25% 22% 25% 20% 0.22x 20% 15% 11% 0.15x 10% 15% 0.12x 0.11x 5% 10% 0.07x 0% 5% -5% -4% -8% -10% 0% ’05 - ’08 ’09 - ’12 ’13 - ’16 ’05 - ’08 ’09 - ’12 ’13 - ’16 Reflects gross performance of the primary and secondary investments made by HarbourVest-managed funds and accounts in each cycle (Vintages 2005-2008, 2009-2012, and 2013-2016), measured as of the end date of the cycle (December 21, 2008, 2012, or 2016), see note 2 Past performance is no guarantee of future returns CONFIDENTIAL 15
Investments have increased only modestly post-GFC Global Private Equity Investment Activity ’05 - ’08 cycle ’09 - ’12 cycle ’13 - ’16 cycle $2.2 trillion invested $1.1 trillion invested $1.7 trillion invested 1,000 800 $ Billions 600 400 200 $87 $78 0 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 Q1 ’16 Q1 ’17 US Buyout Europe Buyout US Venture Asia EM Source: Thomson Reuters, MergerMarket, S&P LCD and HarbourVest analysis of Asia from AVCJ, APER, EMPEA, and GP reporting CONFIDENTIAL 16
Cautious investing has left a healthy “unfunded buffer” US Buyout Funded Level at Cycle End Europe Buyout Funded Level at Cycle End 80% 80% 76% 74% 70% 70% 66% 64% 62% 57% 60% 60% 49% 49% 50% 50% 45% 40% 40% 35% 33% 28% 30% 30% 18% 20% 20% 15% 13% 9% 10% 10% 0% 0% ’05 ’06 ’07 ’08 ’13 ’14 ’15 ’16 ’05 ’06 ’07 ’08 ’13 ’14 ’15 ’16 % 47% 34% 48% 34% Funded Reflects primary investments made by HarbourVest-managed funds and accounts in each vintage year of the cycle (2005-2008 and 2013-2016), measured as of the end date of the respective cycle (December 31, 2008 and December 31, 2016) Past performance is no guarantee of future returns CONFIDENTIAL 17
Asset pricing continues to be elevated US Buyout Entry EV / EBITDA International Buyout Entry EV / EBITDA US US (HV Portfolio) Europe Europe (HV Portfolio) 11.0x 11.0x 10.0x 10.0x 9.0x 9.0x 8.0x 8.0x 7.0x 7.0x 6.0x 6.0x 5.0x 5.0x ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 Source: S&P LCD Leveraged Buyout Report Q4 2016 and HarbourVest internal data (median EV / EBITDA by year) As of December 31, 2016 CONFIDENTIAL 18
Private equity – Sustained outperformance Private equity Pooled Returns by Global Asset Class Other alternatives Public markets 20-year Returns 10-year Returns Private Equity Private Equity 12.3% 9.2% Real Estate 6.0% Infrastructure 6.0% Infrastructure Real Estate 6.0% 2.7% +6.0% +4.7% N/A – no data Hedge Funds Hedge Funds 3.2% MSCI World 6.3% MSCI World 4.5% 5-year Returns 3-year Returns Private Equity Private Equity 12.7% 9.8% Real Estate Real Estate 10.2% 9.5% Infrastructure 7.4% Infrastructure 6.9% +1.6% +5.4% Hedge Funds Hedge Funds 4.3% 3.1% MSCI World MSCI World 11.1% 4.4% Source: Burgiss Q4 2016 benchmarks (global private equity, global real estate, global infrastructure), Hedge Fund Research (HFRI Fund Weighted Global Composite Index), Bloomberg (MSCI World, dividends reinvested in the index) as of December 31, 2016. Past performance is no guarantee of future returns CONFIDENTIAL 19
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