Azalea Asset Management, a wholly owned subsidiary of Singapore’s Temasek, returned to the secondaries market to acquire stakes in funds including KKR, TPG and Warbug Pincus vehicles to assemble the private equity portfolio behind its latest collateralised fund obligation.
Astrea V will see Azalea Asset Management offer bonds backed by cashflows from a diversified pool of private equity funds.
Azalea acquired a portfolio of 38 fund stakes valued at $1.3 billion as of 31 March, according to a preliminary Astrea V prospectus. The stakes, which were acquired last year, include $215 million of unfunded capital commitments.
Azalea also acquired stakes on the secondaries market for Astrea IV, as Secondaries Investor reported in 2017. These included interests in buyout funds it bought from Canada’s British Columbia Investment Management Corporation.
The original holder can also keep the equity and instead issue debt to buyers through publicly listed bonds, as Temasek did with Astrea III and IV, through subsidiary entities.In a collateralised fund obligation, an equity holder sells a portfolio to a new vehicle with a new manager, and the original owner can select which kinds of notes it wants to hold and extract liquidity by selling the equity to a new buyer.
Astrea IV had $1.1 billion of net asset value and $168 million of uncalled capital across 36 funds and was the first made partly available to Singaporean retail investors.
Astrea V is managed by 32 general partners holding 862 underlying portfolio companies, compared with 27 GPs and 596 assets in Astrea IV. KKR is the largest GP at 9 percent of NAV, followed by Warburg Pincus and TPG. Silver Lake Partners IV, a $10.3 billion 2013-vintage, marks the single largest fund position at 5.4 percent of NAV.
The average weighted fund age is 5.4 years.
Azalea will issue $600 million of bonds, of which S$315 million ($228 million; €204 million) will be less risky Class A-1 bonds. Astrea IV included S$240 million of A-1s, of which half were offered to retail investors from S$2,000. It is unclear how many Class A-1 bonds will be made available to the public in Astrea V.