Private Equity
Kensington Capital Partners Limited is a leading Canadian private equity investor, founded in 1996. To date, Kensington has committed over $550 million to private equity investments through its private equity programs. Institutional investors such as pension funds and professional asset managers, as well as high net-worth individuals and retail investors, hold Kensington funds in their portfolios.
Kensington believes that private equity should be considered by every investment portfolio, and that all investors should have access to these investments. The Kensington funds are designed to provide investors with a diversified portfolio of top performing private equity investments that are otherwise unavailable in the public markets.
For more information on becoming an investor in the Kensington Global Private Equity Fund, please review the Private Equity Fund Fact Sheet.
Kensington Global Private Equity Fund
The Kensington Global Private Equity Fund is a mutual fund trust created to provide individuals and other investors with access to a diversified portfolio of global private equity investments, including private equity funds and direct investments in private companies. The Kensington Global Private Equity Fund was formed in 2007 and remains open for new investors.
The Kensington Global Private Equity Fund has performed well as the portfolio has grown and initial investments have reached maturity. As investments are sold and portfolio gains are realized, Kensington intends to distribute profits to Unitholders and re-invest capital into new investments. The first such distribution was paid to Unitholders of record on September 30, 2011.
Distribution September 30, 2011: $1.7 million = $0.68 per Unit
Kensington believes that the Fund remains very well positioned for continued growth in the year ahead.
Kensington Launches New Classes of Units for Investors
The Kensington Global Private Equity Fund, launched in April 2007, is approaching its 5-year anniversary. Our experience with the Fund, and our ongoing dialogue with investors and their Advisors, has found that the Fund is generally well received by our investors, who appreciate the opportunity to diversify their portfolios through efficient and effective access to private equity. However, we have also identified three areas where the Fund's fee structure could be improved:
- Investors want to see a path, over time, to full redemption at their Unit's Net Asset Value (NAV), with no discount or redemption fee.
- The management fee, including the Service Fee to Advisors (where applicable), was "off market" relative to other specialized investment funds.
- The performance fee payable in Units vesting over a 5-year period was viewed as overly complex and, from Kensington's perspective, ineffective.
These observations have led us to a decision to update the Fund's structure with the launch of two new classes of Units: the "Class E Units" and "Class G Units" with new features designed to address each of these areas. The new classes of Units will fully participate in the Fund's portfolio alongside all other classes, with the only differences between classes being their fee structures.
Enhanced Redemption Right
The enhanced redemption right being introduced to holders of the new Class E and Class G Units will provide for a continuation of the Fund's annual redemption cycle, with a reduced redemption fee over time. Initially, the redemption fee remains at 10% of NAV, the same amount as has always been in place for the Class A and Class F Units. But now, after an investor has held the new Class E or Class G Units for at least 3 years, the redemption fee is reduced to 5% of NAV, and after holding the new Units for at least 5 years, the redemption fee is reduced to zero. Investors now have a 5-year timeline to redemption at 100% of NAV in the new Classes of Units.
New Management Fee Structure
For regular investment accounts, the existing Class A Units have a total management fee of 2.35% consisting of 1.95% to Kensington as Manager of the Fund plus 0.40% to the Unitholder's Investment Advisor as a Service Fee. The new Class E Units have a total management fee of 2.65% consisting of 1.65% to Kensington as Manager of the Fund plus 1.00% to the Unitholder's Investment Advisor as a Service Fee. Similarly, for fee based accounts, the existing Class F Units have a total management fee of 1.95% to Kensington with no Service Fee to the Investment Advisor. The new Class G Units have a total management fee of 1.65% to Kensington with no Service Fee. We believe that this new management fee structure is more consistent with current market terms than the prior classes of Units.
Revised Performance Fee
The new Class E and Class G Units will continue to pay a 10% performance fee to Kensington, based on distributions to Unitholders of realized gains from within the portfolio. As always, Kensington cannot earn a performance fee from the Fund unless the Fund earns and distributes profits to Unitholders. However, the new Units will pay the performance fee to Kensington in cash at the same time that the relevant distribution is made to Unitholders. This is a change from the existing Class A and Class F Units, which paid the performance fee in Units vesting over a 5-year period subject to additional conditions.
How to Convert your Units
Each of the classes of Units is fully convertible into each of the other classes at the relevant NAV per Unit with no conversion fees or discounts. Unitholders who wish to convert their existing Units into one of the new classes may do so at any time. Conversion instructions may be placed through the facilities of FundSERV, which will automatically fulfill the conversion requests at the relevant NAVs at month end.
* The Performance Fee applicable to the Class A Units and Class F Units is subject to additional conditions.
Kensington Global Private Equity Fund Performance
Year ended December 31, 2011
NOTE: Total return performance consisting of increases in net asset value (NAV) plus distributions paid to investors.
Governance
The Kensington Global Private Equity Fund is a reporting issuer regulated by the Canadian Securities Regulatory Authorities. The net asset value (NAV) is published twice each month, and the full public disclosure file for the Fund is available on the SEDAR website at www.sedar.com. The Fund’s assets are held by CIBC Mellon Global Securities Services as the independent custodian, and a formal Independent Review Committee is in place to advise on any potential conflicts of interest.
Why Private Equity Outperforms the Public Markets
Investors should expect a well-managed private equity portfolio to outperform the public markets by 500 to 1,000 basis points (or 5.0 to 10.0 percentage points) over the long term. This outperformance is based on fundamental characteristics of Private Equity investing, including:
Supply/Demand imbalance: The number of high quality investment opportunities in the private markets far outweighs available capital.
Purchase prices lower in private markets: Capitalize on private market inefficiencies.
Alignment of interests: Private company owners are more actively involved and management is more responsive.
No public market distractions: Managment can focus entirely on building the longer term business plan rather than satisfying analyst expectations for quarterly results or being burdened by compliance with the public market regulatory framework.
The Kensington Global Private Equity Fund successfully demonstrated this outperformance in 2011.
Additional Kensington Private Equity Funds
Kensington manages several other private equity funds designed for institutional investors, including funds that are currently open to new investors. Interested investors should contact Kensington for additional information.
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