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Temasek’s Azalea enables retail investors to climb risk-return ladder

Warburg Pincus, KKR and Permira are among private equity funds included in Astrea VII – the first securitisation to offer the Singaporean public access to higher risk-return profile bonds.

Retail investors are being offered access to a potentially higher returning class of bonds in the latest private equity-backed collateralised fund obligation from Temasek subsidiary Azalea Asset Management.

CFOs enable asset owners to securitise a funds portfolio to generate liquidity without having to sell their interests on the secondaries market, according to law firm Kramer Levin. The resulting bonds are backed by cashflows generated by the underlying funds.

Azalea has made S$380 million ($274 million; €261 million) of its latest CFO offering available to the Singaporean public, according to a Thursday statement. This follows the placement of S$521 million worth to institutional and accredited investors, which accounted for 60 percent and 40 percent respectively.

This latest offering comprises S$280 million of Class A-1 bonds, which feature a 4.125 percent annual interest rate at a S$2,000 minimum subscription rate; and S$100 million of Class B bonds, which boast 6 percent interest at a $2,000 minimum in US dollars. The latter bonds are junior to the former, hence the differing return profile and buy in.

“Through our regular engagement with retail bond investors, we have seen significant interest to invest in the more junior classes of the Astrea PE bonds,” chief executive Margaret Lui said in the statement.

“We are pleased that Astrea 7 offers retail investors in Singapore the option to invest in a US dollar-denominated bond. This is very much in line with our commitment to broaden access to private equity and better cater to investors with different risk preferences and investment horizons.”

Astrea VII is broader in scope than previous incarnations. The 2019-vintage Astrea V, for example, only made S$180 million of Class A-1 bonds available to the public, as Private Equity International reported at the time. Astrea VI, listed last year, offered S$250 million of A-1 bonds.

Astrea VII is backed by cashflows from a $1.9 billion portfolio comprising 38 private equity funds managed by 29 GPs and containing 982 portfolio companies, according to its prospectus. The US accounts for 55 percent of the portfolio, followed by Europe at 27 percent and Asia at 18 percent. The majority (77 percent) is in buyouts, with the remainder in growth equity.

Warburg Pincus is the single largest GP exposure at 8.5 percent, followed by KKR and Permira. The latter’s 2014-vintage Permira V is the biggest individual fund exposure at 4.2 percent, followed by Advent International GPE IX-G at 3.5 percent and KKR Asian Fund III.