Astrea IV4.35%B280614

This Temasek subsidiary's private-equity bond for retail investors could spice up the market

By: Chan Chao Peh
08/06/18, 05:02 pm

SINGAPORE (June 8): Azalea Investment Management, a Temasek Holdings subsidiary, has launched what is believed to be the world’s first listed private-equity bond for retail investors. And the move could add more variety to Singapore’s stock market.

Previously, private-equity investments were almost exclusively the domain of sophisticated investors and institutions. Bonds sold locally had to be in tranches of at least $200,000. The Astrea IV Bonds, as Azalea’s new offering is called, will be available for subscription at a minimum of $2,000 each.

The Astrea IV PE Bonds is the fourth in the series launched by Azalea, but the first to be offered to retail investors.

For Azalea, the key point of launching this new product is not so much to raise capital as it is to introduce a new asset class to the market for retail investors. “This is not a leveraging exercise; it is really about bringing the product to the marketplace,” says Margaret Lui, CEO of Azalea.
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Find out more in this week’s issue of The Edge Singapore (Issue 834, week of June 11), on sale now at newsstands.

More details in https://www.theedgesingapore.com/investi...ice-market

Looks like many investors are hungry for a 4.35% yield ...

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Astrea IV offering of Class A-1 bonds 7.4 times subscribed
Tue, Jun 12, 2018 - 8:40 PM

ASTREA IV's S$121 million retail offering of Class A-1 private equity bonds closed 7.4 times subscribed at noon on Tuesday, with nearly S$890 million in valid applications received. These are the first retail bonds to be backed by cash flows from private equity fund investments................

https://www.businesstimes.com.sg/compani...subscribed

(12-06-2018, 10:52 PM)dreamybear Wrote: Looks like many investors are hungry for a 4.35% yield ...

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Astrea IV offering of Class A-1 bonds 7.4 times subscribed
Tue, Jun 12, 2018 - 8:40 PM

ASTREA IV's S$121 million retail offering of Class A-1 private equity bonds closed 7.4 times subscribed at noon on Tuesday, with nearly S$890 million in valid applications received. These are the first retail bonds to be backed by cash flows from private equity fund investments................

https://www.businesstimes.com.sg/compani...subscribed

my gut feel is that with rising interest rates, temasek is rushing to launch this PE bonds. If we wait patiently, after a few fed rate hikes, we will most likely be able to buy it below par by end of year or next year

First, thanks to the administrators for restoring the website.

Indeed, I think the Singapore Savings Bonds' interest rates have been increasing over the past few months according to some websites tracking them. The average yearly return for Jul2018 is now at 2.63%(held for 10 full yrs)
Details at http://www.sgs.gov.sg/savingsbonds/Your-...-bond.aspx

I am waiting for the interest rates to rise a bit further before investing, maybe 3% would be good. *dreamybear dreaming*

As for the Astrea IV Class A-1 bonds, there is a step up interest of 1% after five years. Buying below par would surely bring very attractive returns provided there are no default .

I have a question : Why should an investor (in this case Azalea Investment Management, a Temasek Holdings subsidiary, presumably having already invested a portion of Temasek's capital and reserves) in diversified PE funds - which themselves individually would invest in private companies (including buy-out of listed companies) supported by appropriate gearings in order to achieve the desired rates of return - raise new unsecured bonds?

Isn't it correct to say Temasek is gearing to invest in PE funds, instead of being more conservative by using a portion of its own capital and reserves to do so? This appears rather risky! If I have $5.0m and wish to invest the sum in PE funds, I doubt my bankers would lend me another $5.0m so that I can invest a total of $10.0m in the PE funds.

https://www.businesstimes.com.sg/banking...-income-ho

1) Ho Ching did the sale pitch (worth the $$$!)
2) It's a Temasek's subsidiary!! 350bs vs 242milos only-Tranche A1, loose change for temasek..
3) DBS is banker

Enough said, take my money anytime!!

This bond is to allow temasek to "double-up" on their investment quantity at this raising interest rates environment!

buy-buy-buy!!

Funny there not a a lot details of what the bonds is made up of.
I think it is critical to know what is inside a nicely wrapped package.

You are investing in a packaged bond offered by a subsidiary of Temasek.
This packaged bond is made up of 36 private equity funds.
These 36 private equity funds is invested in 596 companies.

These 596 companies are made up of information technology (23%), consumer discretionary (21%), industrials (12%), healthcare (11%) and financials (10%). The geographical exposure it faces constitute the US (63%), Europe (19%) and Asia (18%).

The way I look at it. It pretty much means the investors are paying the truckloads of managers to invest in Apple, P&G, Boeing, pfizer, JP Morgan, etc

Maybe most of you here can do better than that. (even without the opportunities that are only available to institutional investors.)

Not easy for most retailers. This is a way for many. Myself i find it a hassle. So this bond is a very good way. Yes, better returns if we can copy exactly theoretically. I rather pay a fee for them to manage for me.

It was stated that this offering was meant to create new products for the market, amongst other altruistic reasons, rather than to finance their investments. After all, the size offered was pretty small. So on their intention, I actually believe what the marketers of Astrea bonds claim.

In fact, I find the bonds to be the best deal you could get in recent history. There is almost no risk of default. A lot of the portfolio companies have to go to zero for the bond to default. And even then, DBS may backstop. For 4.35%, I don't think you can find anything else that is of equivalent risk-reward. Probably this is why the offer size is so small, and subscription so high.

As for reconstructing a portfolio that is similar to the underlying assets of Astrea, I don't think that is possible for retail investors. Mainly because private equity assets -- being the portfolio companies -- are not listed. The closest you can get is to buy a fund of private equity bond hedge fund. I'm not sure if such a product exists, but the performance of such funds depend on the ability of the fund manager to profitably exit their portfolio companies. And it is traditionally not available to retail investors.

While private equity as an asset class is not particularly safe, unlike traditional private equity bonds, the performance of Astrea bonds does not solely depend on profitable sales of the fund's portfolio companies. Astrea's success depend essentially on Temasek's willingness to default, if it ever comes to that, after all its build-in safeguards fail. In fact, given the safeguard built-in, it does not matter that the underlying assets are private equity companies; it could have been anything else and it wouldn't make a difference.

In other words, Astrea retail bonds are one of a kind (charity). It is unlikely that there will be another similar issue.

With regards to the pricing, and the interest rate environment, I think it is okay if the investor intends holds to maturity (or call). After all, fixed deposits aren't going to pay anything close to 3%. But if there is an intention to trade, there is a possibility of loss as savvy investors certainly will not want to buy at par as interest rise.

p.s. I suppose if you're an accredited investor you could invest in class B Astrea bonds, which are more reflective of the actual risk-reward of private equity financing.

those capital call line, liquidity line 'committed' by DBS...does anyone, after reading info in the prospectus, know how committed are these lines?
can DBS turn back its words in the times of severe stress market conditions?