1. Global Private Equity Eileen Xie December 2005 April 22, 2017
T H O M S O N F I N A N C I A L
April 22, 2017
Global Private Equity
Good afternoon everyone. I am very delighted to be here on behalf of Thomson Financial to present a short overview of the state and performance of the global private equity markets. Due to the fact that limited partners, general partners and investment bankers alike are increasingly looking to China and Asia market for opportunities, Thomson is dedicated to work with our contributors to deliver a truly global view of the market to include Asia especially China.
Eileen Xie December 2005

2. Thomson Venture Economics – Performance database
April 22, 2017
Thomson Venture Economics – Performance database
Provide industry-standard products for use in benchmarking, commitments, asset allocation and due diligence
Maintained by Thomson Venture Economics since 1969
1740 US Funds formed
950 European/UK Funds
187 Other Intl Funds formed
I will start with some highlights about Thomson’s Venture Economics database, from which the data for this presentation is drawn.
The performance database has data going back to 1969 and covers more than 1700 funds in US, about 1000 is Europe and 187 in other areas …
Besides fund performance information, Thomson Venture Economics also collects fundraising, investment, and exit data.
Information Requirements
Firm & Fund Information
Portfolio company investment
Transaction detail
Cashflows -- capital calls, distributions, net asset values

3. April 22, 2017
Private Equity Net Returns to Investors* From Inception to June 30, 2005 V C
BUYOUTS
Lets first take a look at the cumulative return of entire portfolio of private equity funds regardless of vintage year and analyze their performance by stage classification.
The way to interpret these results is to imagine a limited partner who invested in all funds
that were formed from 1969 in the US and 1980 in Europe to the present.
The classifications of funds follows the Thomson Venture Economics standard classifications. Balanced funds are venture funds that are either diversified or have no stated stage focus.
The column heads represent various return measures –Pooled IRR is calculated by aggregating cash flows together to create a portfolio irr, the upper quartile and median return, DPI, RVPI and TVPI which is the sum of both DPI and RVPI and represents the total return on paid in capital.
The 18 Asian funds include both VC and BO funds that are domiciled in the US but investing solely in Asia. The upper quartile return being 10.9% with a median return of -1.2% revealed a much more volatile return range than the US and the European markets. Also, with a median return of negative 1.2%, investors cannot help asking, what is the purpose and will this change for better.
For me--D (Distribution) Cash or the value of stock disbursed to the limited partners of a venture fund.
D/PI (Distributions to Paid-in Capital)The amount a partnership has distributed to its investors relative to the total capital contribution to the fund.
Residual ValueThe remaining equity which a limited partner has in a fund.
*Relatively young market so volatility is normal.
*US Funds formed
European Funds formed
Asian Funds formed
Source: Thomson Venture Economics/NVCA/EVCA

4. April 22, 2017
Asian, US and European Private Equity Cumulative IRR Since Inception by Calendar Year (Inception to June 30, 2005)* US
EUROPE
Asia
Again a cumulative returns since inception on a calendar year basis
*Comparing to the more stabilized and also more mature US and European markets, Asian returns are volatile, because VC is a very young industry here.
It can be seen that through the years, the return has been fluctuate along 0% with recent years showing potentials of positive return, based on the available data. It started to stabilize because these funds are maturing and distributing money. What is left to be seen is how the new batch of VC funds that were recently raised will impact these returns. And will the return trend stay on the positive side.
*US Funds formed
European Funds formed
Asian Funds formed

5. April 22, 2017
Venture Economics Private Equity Performance Index (PEPI) Pooled IRR net to investors as of June 30, 2005 All funds formed
The US market statistics may shed some light. This slide is to look at US IRR returns going back in time from June 30, 2005 for longer and longer periods of time –last one year, the last two years, etc all the way out to 20 years.
While it is true that investors can only really measure a fund’s ultimate return in the long run- that is after it’s been liquidated, interim performance can give information as to how the fund is correlated to current equity market events. The good news here is that one year returns have bounced back into the positive.
Still the most relevant way of looking at the numbers are comparing them to what investors are expecting in certain market situation. A 0.1% 5 year return may sound too low but considering Internet bubble and the equity market melt down around , it may not be too far away from investor expectations.
Source: Thomson Venture Economics/NVCA

6. April 22, 2017
US Venture Funds Annualized Net Cumulative IRR by Vintage Year As of June 30, 2005
This is a view at one point in time of the life cycle of the US venture industry.
What is obvious to see is that funds that were formed just prior to the internet bubble have been stellar performers – ostensibly they invested before the bubble and were able to cash out at the peak in As a result funds that were formed between 1994 and 1996 are among the best vintage years in the last twenty years.
What is also easy to observe is the j curve effect. Looking at the trend after the peak return period. Funds early in their lives and coupled with the fact that they were formed during the bubble and right after suffered severely. The return dropped sharply. The returns we see for funds formed 2001 and 2002, 2003 and 2004 are negative as expected.
*This is what we can expect at least in the beginning for the recent Chinese funds formed in recent years
Source: Thomson Venture Economics/NVCA

7. April 22, 2017
U.S. Venture Capital Since Inception Realization Multiples (DPI/RVPI) by Vintage Year As of June 30, 2005
While cumulative IRRs since inception are useful, investor are sometimes more interested in real returns – that is cash on cash or investment multiples, which are more likely to be negative in VC’s early life.
This slide is an identical representation of returns since inception by vintage year as of June , but in the sense that how much is realized DPI and how much is still tied up in unrealized net asset value RIPI.
Older funds have total returns that are almost all realized while the youngest funds returns are virtually all unrealized. The “best vintage years” in the prior illustration – funds formed in 1994 to 1997, have returned about 4.5 times
invested capital back to their investors.
We expect of course for realizations to materialize as the younger funds mature, but there are still some question as to how long (if ever) funds formed at the peak of the market in will be able to return their capital to their investors.
The J curve effect is also obvious in this view.
Source: Thomson Venture Economics/NVCA

8. US, China Venture Capital Industry Comparison
April 22, 2017
US, China Venture Capital Industry Comparison
The VC industry in China is obviously in its early stage, to better answer the question as to whether or not the funds will pick up on the realized return and follow a J curve as displayed in the US VC market, it is helpful to exam the development or trend if there is any in the market. Let’s take a look at the activities and investment statistics in China.
Comparing the last 4 years and here is how the Chinese market has grown:
The number of firms and funds more than doubled.
All the other indicators increased rapidly and steadily.
The growth is comparable to US numbers, if not outpaced.

9. Global VC Fundraising Capital Raised by VC Funds; 2000-Q3 2005
April 22, 2017
Global VC Fundraising Capital Raised by VC Funds; 2000-Q3 2005
From the fundraising perspective, when data specific to China is difficult to get in a desirable sample size, the whole Asian statistic is used. At the Global Private Equity market, we can see that commitments have stabilized after the long substantial correction following the post technology boom and bust.
Asia following a similar trend to the US ---although that its decline is on a much smaller scale in commitments post bubble. Overall, venture capital commitment levels have in 2004 were quite robust, showing a rise over the year before. To date 2005, it looks to surpass fundraising in 2004.
Asian fundraising, which is a relatively young market had strong commitments – comparable to Europe.
The amount of money raised in the past two years is a positive sign for future growth in the industry in that while the pool of available capital has drained somewhat, LP’s continue to invest in private equity funds..
Underlying trend in Asia may be stronger than what the chart shows due to limited data. Thomson built broad relationships across Europe and would like to do the same in Asia.
Source: Thomson Venture Economics/NVCA

10. Global Venture Investment Activity 2000-Q3 2005
April 22, 2017
Global Venture Investment Activity 2000-Q3 2005
*For investing activities, as you can see, 2003, 2004, and 2005 years have been stable globally following the burst of the tech bubble.
* North America in saw an up-tick from 2003 at over 20 billion invested for the year. The last year and half has averaged between 4-6 billion per quarter which is a comfortable and stable level of investing looks to equal if not surpass 2004’s figures.
In the North America, the majority of financings within the past year have been focused on life sciences and software, where as the majority of financing in Asia is focused on semiconductors and electronics.
Unlike the past few years in which investors focused on follow on financing to salvage their portfolio, we have seen the last 2-3 quarters a rise in first financings and early stage financings.
Investors continue to be more selective about the investments they make and have lengthened the due diligence cycle and increased the hurdles needed for entrepreneurs.
Source: PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital
Association MoneyTree™ Survey

11. US Firms Investments by Nation 2000 vs. Q1-Q3 2005
April 22, 2017
US Firms Investments by Nation 2000 vs. Q1-Q3 2005
*Since about 50% of investments made in Asia are from North America and Europe, especially North America, for the next 3 slides, we will take a look at the US investment by nation in Asia, especially focusing on how important China as a investment destination.
The US investment in Asia/Australia has grow from 4% to 9% in about four years.
Source: PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital
Association MoneyTree™ Survey

12. Association MoneyTree™ Survey
April 22, 2017
US Firms Investments Into Asia/Australia by Dollars Invested vs. Q1-Q3 2005
Taking the Asian piece of US investments and looking at dollars invested into different countries and regions. China took 8% of the whole pie in 2000 but the % increased to 17% by 2005’s 3rd quarter.
Source: PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital
Association MoneyTree™ Survey

13. Association MoneyTree™ Survey
April 22, 2017
US Firms Investments Into Asia/Australia by Number of Deals 2000 vs. Q1-Q3 2005
The number of deals in China increase from 6% of the total in 2004 to 28% of the total in Asia.
Source: PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital
Association MoneyTree™ Survey

14. Conclusion & discussion
April 22, 2017
Conclusion & discussion
So as we can see, with the influx of money being raised and invested in china the potential for future exits is strong.
Confidence in the market is ever increasing as more and more investors turn to china to invest their money thus leading to potential positive returns in the marketplace and realizations for investors.
If successful, China will be one of the biggest opportunities for investors now and in the future.