Walsh mpany Asset Management Pty: Half-year report and accounts


CD Private Equity Fund III Report to Unitholders September 30, 2021

Dear unitholders,

We present to you this report on the performance of CD Private Equity Fund III (Fund) for the six-month period ended September 30, 2021 (HY22).

For the six-month period ended September 30, 2021, the Fund generated total returns of 27.5%, based on the net asset value after tax and including the distribution of 12.5 cents per unit paid to unitholders. in June 2021. This performance reflects the strong returns of the underlying investment managers stemming from dynamic equity markets and private equity deal flows in the United States during the period. On the same basis, the Fund has generated total returns of 14.8% per annum since inception (including distributions and net of any expenses).

The return on the Fund’s investment in US Select Private Opportunities Fund, LP III (LP), the investment vehicle through which the Fund’s investments in the underlying US private equity funds are made, has was strong during the period, up 25.0% in US dollar terms. terms. The depreciation of the Australian dollar against the US dollar also had a positive effect on unit value performance this period, with the Australian dollar falling from 75.98 US cents to 72.27 US cents, resulting in an unrealized foreign exchange gain. of $ 8.0 million. Overall, during the period, the Fund posted net income of $ 40.6 million, or 56.42 cents per unit, compared to a loss of $ 6.8 million, or 9.42 cents per unit for the corresponding period of last year. As at September 30, 2021, the Fund had pre-tax net assets of $ 192.9 million representing $ 2.68 per unit and after-tax net assets of $ 186.4 million representing $ 2.59 per unit.

Market conditions

Globally, capital markets have recovered strongly in the 12 to 18 months since the initial impact of COVID-19 was felt. Despite the current spread of the Delta variant, momentum remained positive in 1H22 as global economic conditions continued to improve, supported by successful vaccine deployments and the gradual reopening of major developed markets.

Equity markets remain close to record highs, interest rates remain low and liquidity in capital markets remains high. Global mergers and acquisitions (mergers and acquisitions) hit record highs in the first half of 22, and private equity firms, aided by a strong fundraising environment, are participating in an increasing size and rate of transactions . These current market dynamics are very supportive of the lower middle market, where the Fund has targeted investments, and produced many strong results before and during the period, some well above our expectations, including Conexiom (Luminate Capital Partners, LP), A Cloud Guru (Elephant Partners Fund I, LP) and Knowbe4 (Elephant Partners Fund I, LP and US Select Direct Private Equity II LP).

Recent meetings with our underlying managers have been universally positive, and the momentum of the second half of 2020 has clearly continued into 2021, however, inflation concerns in the United States are increasing, as are the yield curves. , which could weaken recent positive market sentiment. Supply side constraints (freight delays and production at capacity), inflationary pressures in the labor market, rising energy costs, and strong economic activity all lead to the possibility that the inflation is not as “transient” as initially expected.

Division

The Fund announced a distribution to unitholders during HY22, paying 12.5 cents per unit on June 29, 2021.

Distributions paid since inception are shown in the chart below, which also shows the value of the initial investment and the net tangible assets per unit at the end of that six month period. Total distributions paid to investors since inception of 37.8 cents per Unit represent 24% of the original offering price of $ 1.60.


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