We’re turning 10 on 16 January 2025! 

What a journey it’s been these past 10 years. Whether it is staying true to our mandate of broadening private equity (“PE”) access for a wider investor base, creating new platforms and products that are robust and scalable for the long-term, or actively promoting investor education and financial literacy – thank you for being there with us every step of the way.

In celebration of this big milestone, we’re excited to share with you a deeper look into who we are, and what makes us uniquely Azalea. 

Here are 10 things you may not know about our organisation. 

 

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#1: We’re named after a flower

 

You’ve probably guessed it – we’re named after the Azalea flower. Known for their vibrant colours and delicate petals, Azaleas are a sight to behold. They are also a type of rhododendron, which are large, evergreen bushes.

This plant embodies who we are:

• Passion: Brightly coloured Azaleas symbolise a deep passion. What makes us Azalea is our deep commitment and passion to making PE more accessible for all.
• Resilience: Azaleas are known for their ability to withstand adversity such as harsh weather, pests, and diseases. Regardless of the investment environment, we strive to remain steadfast in our commitment to our partners, investors and employees.

• Creativity: Fuchsia azaleas signify creativity. We’re committed to developing innovative investment platforms and products.

   

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#2: Azalea was incubated in Temasek's offices

 

Azalea was established by Temasek in 2015, with a unique mandate to make PE accessible to a broader group of investors. Naturally, our first home was the Temasek Holdings office, located in Dhoby Ghaut. 

In 2018, we made the move to our current home, Guoco Tower. The change in office location marked the start of our journey in establishing our own footprint.

 

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#3: Astrea is out of this world (literally)

 

In 2016, upon receiving the baton from Temasek who had launched Astrea I and II, Azalea issued Astrea III, offering investors investment grade bonds that provide regular distributions and exposure to PE. Subsequent launches of Astrea IV, V, VI, 7 and 8 expanded PE access particularly for retail investors. 

The name Astrea is derived from the Greek word aster, meaning star. 

 

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#4: Altrium is an acronym

 

No, Altrium isn’t a real word. Yes, we made it up, but only with the best intentions! 

Altrium stands for “Alternative Retirement Investment for U and Me”. Our Altrium platform enables accredited investors to co-invest with Azalea and gain access to top-performing global PE fund managers. It effectively addresses the traditional challenges investors face in accessing PE investments.

 

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#5: Our Astrea Bonds fulfilled many firsts

 

Staying true to our mandate of making PE an accessible asset class for all, Azalea’s Astrea IV Class A-1 Bonds were the first retail PE Bonds listed on the Singapore Exchange (SGX) in 2018. 

In addition, our Astrea 7 Class B Bonds issuance in 2022, which expanded options for retail investors, marked the first USD-denominated retail bond IPO on the SGX.

 

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#6: Today, Astrea is the largest retail bond platform in Singapore

 

Today, Astrea is the largest retail bond platform in Singapore

This highlights the appeal of Astrea bonds across market cycles and is a milestone we hold close to our hearts.

 

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#7: We have more than 70,000 unique Astrea retail bondholders

 

We have more than 70,000 unique Astrea retail bondholders

We value each individual of our retail investor base, and the trust and confidence they have placed in us and our Astrea platform over the past decade.

In turn, we remain committed to investor education and expanding our initiatives to deepen understanding in PE as an asset class.

 

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#8: Margaret, our CEO, cooks for the team! 

 

As a yearly treat, our CEO, Margaret, cooks for the entire Azalea team at our year-end office party. Like a family coming together, this special occasion is one that we all look forward to as we celebrate the team’s contributions for the year (over good food, of course)!

A notable dish from Chef Margaret? Sakura Ebi Angel Hair Pasta.

 

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#9: Teamwork is at the heart of who we are

 

When we asked our staff, what is one thing they most liked about working at Azalea, more than 70 percent said, “teamwork”.

As one of our company’s key values represented in the acronym AERIIT (accountability, excellence, respect, integrity, innovation and teamwork), teamwork forms the bedrock of our organisation. It is our hope that all members of #TeamAzalea know that they are not alone and their individual contributions matter.

 

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#10: The founding team remains rooted at Azalea 

 

Those who joined us in 2015 as part of the founding team remain in the company today! With a decade of dedication under their belt, what keeps them going at Azalea?

"I’m proud to have witnessed how far we’ve come in these past 10 years. While we’ve grown in size since our early days, our currently more than 60 strong Azalea team continues to place our founding spirit of innovation and teamwork at the core of everything that we do. I’m confident about what the next 10 years will bring.” – Lim Jun Jie, Director, Investor Solutions and Marketing

What a blast the past decade has been. Regardless of what the next 10, 20, 30 years will bring, we’ll strive to continually broaden PE as an asset class, and expand financial education and literacy for more.

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Private Equity (“PE”) firms invest in companies, aiming to generate returns for their investors by proactively making improvements and growing the companies before selling them at a higher value. This article, part of our Private Equity Primer Series, explores the PE investment lifecycle, highlighting the key stages and strategies for successful investments. 
 

 

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1. Forming the fund and fundraising

The initial phase of PE lifecycle involves the formation and fundraising of the fund. During the formation phase, the fund manager develops a strategic investment focus, establishes fund terms and prepares key offering materials like the Private Placement Memorandum (“PPM”) and Limited Partner Agreement (“LPA”). Following the formation, the fund enters the fundraising phase, where the manager approaches potential investors to secure capital commitments. The initial closing marks the start of the fund's investment activities, but fundraising often continues to meet the overall fundraising target. 

 

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2. Identifying Potential Investment Opportunities

To generate returns for investors, fund managers will begin by scouting for investment opportunities that align with their strategy. They utilize a mix of methods including market research, professional networks, investment bankers, and direct outreach to potential targets. Advanced data analytics and AI tools are increasingly used to identify trends and promising sectors. Here are some of the traits that PE firms look for when identifying targets: 

• Historically Profitable with Cash Generation Potential

  Fund managers favour companies with a history of profitability and cash flow generation, even if they're currently underperforming. A strong financial past suggests potential for future success. 

• Low Failure Risk with Strong Asset Base

  Considering the leverage involved in PE deals, fund managers prefer companies with low failure risks and a substantial tangible asset base. These assets act as collateral for loans and ensure steady cash flow for debt repayment.

• Opportunities for Productivity Enhancement

  Fund managers often target companies with room for significant performance enhancements. Fund managers use their resources to drive productivity improvements through various levers such as operational enhancements, technology upgrades, and market expansion.

   

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3. Performing Due Diligence and Acquisition

Once a fund manager identifies a potential target company, a comprehensive due diligence process is undertaken. This multifaceted approach involves examining various aspects of the target company to ensure a well-informed investment decision. Some of the factors considered are:

• Financial Performance, e.g. EBITDA and net profit margins, etc.
• Market Position and Competitive Landscape, e.g. market share, growth potential, etc. 
• Legal Review, e.g. compliance, intellectual property concerns, etc. 
• Operational Assessment, e.g. production efficiency, supply chain, management effectiveness, and cost structures, etc. 
• ESG Evaluation, e.g. carbon footprint, adherence to reporting requirements, etc. 

Based on the due diligence findings, the fund manager moves on to the acquisition process that involves finalising the acquisition structure, negotiating the final terms of the deal, including the purchase price, financing structure, securing necessary financing from banks or other financial institutions, and finally closing the deal. 

 

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4. Adding Value and Managing Portfolio Companies

Post-acquisition, fund managers engage actively in the management of their portfolio companies. They might implement strategic changes, improve operational efficiencies, or streamline management practices. The goal is to increase profitability and growth prospects. Fund managers often leverage their network and expertise to provide strategic guidance, access to new markets, and additional capital for growth initiatives.

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Case Study Snapshot:

One notable example of how a PE firm employ a mix of value creation strategies is the acquisition of a US-based discount retailer, Dollar General, by Kohlberg Kravis Roberts (KKR):

Dollar General Corporation is a discount retailer. The Company offers merchandise, including consumable items, seasonal items, home products and apparel. Its merchandise includes brands from manufacturers, as well as its own private brand selections with prices at discounts to brands¹.

1.    Management Changes: KKR brought in a new CEO, Rick Dreiling², who previously ran drugstore chain Duane Reade Inc. He and his new management team was instrumental in boosting sales and implementing operational improvements. The leadership change ensured effective execution of new strategies.
2.    Operational and Product Optimisation: The new team and KKR streamlined Dollar General’s operations by improving supply chain management and reducing operational costs. Concurrently, they optimised their product mix, focusing on high-margin products like private-label goods, and streamlined their assortment by eliminating lower-performing items³.
3.     Growth and Expansion: Dollar General's market expansion involved the addition of new stores and the remodelling of existing ones⁴, at a time when market conditions were favourable due to falling lease rates.
4.    Debt Restructuring and Cost Management: Despite a substantial debt load, KKR effectively managed Dollar General’s financial leverage, improving its Debt-to-EBITA ratio⁵. Additionally, they significantly reduced shrinkage, which includes losses due to factors like shoplifting and mispricing, thereby saving considerable costs and contributing to the overall financial health of the company.

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This article delves into the structure and economics of Private Equity (PE) Funds, a key segment in the global investment landscape. We explore the framework, roles of key stakeholders, fee structures and trends in PE funds.
 

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Basic Framework of PE Funds

A typical PE fund operates over a 10 to 12-year lifecycle, encompassing the fundraising, investment, management and exit phases. At its core, Limited Partners (LPs) commit capital, which General Partners (GPs) deploy into investments. Profits are generated through asset management and divestment, with returns distributed to LPs while GPs receive their carried interest if PE funds meet the returns hurdle. This structure is designed to align the interests of GPs and LPs while maximising investment returns.
 

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In-Depth Look at General Partners (GPs) and Limited Partners (LPs)

GPs are responsible for the day-to-day management of the fund. They identify investment opportunities, conduct due diligence, and make investment decisions. GPs also play a crucial role in managing, adding value to portfolio companies and exiting the investments. Their compensation is typically a combination of management fees and carried interest, aligning their financial interests with the fund's performance.

LPs, on the other hand, provide the capital required for investments. They are typically institutional investors, such as private banks, insurance companies, family offices or high-net-worth individuals. LPs have limited liability, restricted to their capital commitment. They rely on GPs to manage the investments effectively and have limited involvement in the day-to-day operations of the fund.

The relationship between GPs and LPs is governed by a legally binding contract that establishes the terms and conditions of the applicable fund (such as a limited partnership agreement). Those terms and conditions would include the fund’s investment strategy, the rights and obligations of the LPs, how and when profits will be distributed amongst the partners, fees and expenses payable, and governance-related provisions, amongst others. 

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Fund Economics: Fee Structures and Returns

The economics of PE funds are anchored in their fee structures. They charge a management fee and performance fee, also known as carried interest. 

Management fees are typically charged on a quarterly basis and calculated as a percentage of committed capital or assets under management (AUM) that is commonly around 2% per annum. 

Carried interest represents a share of the profits earned by the fund, accruing to the GPs as a performance incentive. Typically, GPs receive 20% of the profits, but only after returning the initial capital contributed by the LPs and achieving a predetermined rate of return, known as the hurdle rate. This structure ensures that GPs are motivated to maximize returns for the investors.

Fee structures can vary based on the type of fund. For instance, evergreen funds or co-investment funds might have different fee arrangements, reflecting their unique investment strategies and risk profiles.
 

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Types of PE Fund Structures

Private Equity (PE) funds can adopt various structures to meet specific investment strategies, regulatory requirements and investor preferences. Here are some of the common types of PE fund structures: 
 

1.    Limited Partnership 

Common in private equity, where limited partners, or investors, provide capital and have limited liability, and a general partner manages the fund. This structure is favoured for aligning interests between investors and managers and for the limited liability protection it offers to investors. 
 

2.    Fund of Funds (FoF)

These funds invest in a portfolio of other funds rather than investing directly in stocks, bonds or other securities. This allows investors to achieve diversification across different managers and strategies.
 

3.    Co-Investment Fund 

In a co-investment fund, investors are provided direct equity exposure at the portfolio company level typically with no fees and carry charged by the underlying GPs. 
 

4.    Evergreen Funds

These funds do not have a fixed lifespan and operate on a perpetual basis. Capital can be raised, and investments can be made indefinitely. Investors often have the ability to enter or exit the fund at predetermined intervals, providing more flexibility compared to traditional closed-end structures.
 

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Wrapping Up

The interplay between GPs and LPs, shaped by structured economic incentives and legal agreements, underscores the essence of PE funds. Diverse in structure, from Limited Partnerships to models like Evergreen and Co-Investment Funds, they address a wide range of investment strategies and investor needs. In the next article of the series, we dive deeper into the lifecycle of a PE fund. 

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