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© 2018 // 57 Stars / Confidential //
Disruptive Trends in Emerging Markets Private Equity
Steve CowanManaging Director
May 2018
www.57stars.net
/ Confidential // 2
57 Stars Overview57 Stars focuses on private equity markets outside the US and Western Europe, primarily in Emerging Markets (“EM”)
Established Firm Formed in 2005, independent and employee owned ~ USD 3.6 billion raised and managed1
Four offices in the US, Asia, and Europe
Experienced & Stable Team
Experienced team of more than 20 employees Core team investing together for an average of 15 years
Focus on Emerging Markets
6 Managing Directors, averaging 25 years working in EM Deep, long-standing industry relationships with elite GPs Expertise in primary partnerships, co-investments, and secondary investments
Thematic Investment Approach
Thesis-driven & structured approach to transactions in high-growth markets More surgical approach to dynamic sectors and opportunities Global focus allows for greater selectivity & better risk-adjusted performance
1 As of February 28, 2018.
/ Confidential // 3
Investment StrategyCapitalizing on secular growth stories through thematic investing
Structured Transactions
Co-Investments
Mature Primary / Secondary
High Growth Sectors
Special Situations / Credit
Alpha Generation
Reduced Blind Pool Risk
Proximity to Assets
Accelerated Capital Deployment
Fee & Carry Reduction
Structured Relationships
/ Confidential // 4
Macro-economic Overview
/ Confidential // 5
Scale & Scarcity of CapitalEM constitute ~60% of the global economy while remaining under-penetrated by PE compared to Developed Markets
GDP (PPP current prices)1
21%
14%17% 16%
12% 11%8% 8% 8%
6% 6%9%
2012 2013 2014 2015 2016 2017 H1
EM Fundraising EM Investment
EM Fundraising & Investment as % of Global Total2
DMEM
USD 27.2 trillion USD 126.6
trillion USD 167.8 trillion
1990 2017 2022F
36% 59% 62%
1 Source: IMF World Economic Outlook.2 Source: EMPEA Industry Statistics H1 2017. Data as of 30 June 2017. Includes private equity, private credit, and private infrastructure and real assets.
/ Confidential // 6
11%
31%
46%
26%
48%
13%
0%
10%
20%
30%
40%
50%
No. of DigitalCustomers
Mutual FundsAUM
Private HealthInsurance
China India
Valuation Gap & High GrowthLower valuations combined with high growth in secular sectors
5-Year Projected Annualized Growth2US & EM Public Markets CAPE1
0
7
14
21
28
35
US (S&P 500 CAPE) EM (MSCI EM) CAPE
1 Source: IMF World Economic Outlook (“WEO”).2 Source: No. of Digital Buyers: Statista, 2016‐2020. Private Health Insurance: Ernst & Young for India, 2017‐2021 & MunichRe for China, 2016‐2020. Mutual Funds AUM: IBEF< IIFL for India & Mornigstar, FSA, Oliver Wyman for China, 2016‐2020.
/ Confidential // 7
0
1,000
2,000
3,000
4,000
5,000
0
500
1,000
1,500
2,000
2,500
2007 2009 2011 2013 2015 2017
USD BillionUSDFederal Reserve Assets S&P 500
Monetary Policy & Funds FlowsU.S. and other Developed Market (“DM”) monetary policies have distorted capital flows and currencies
-75-50-25
0255075
100
2007 2009 2011 2013 2015 2017
USD
Bill
ions
Bonds Equities
Federal Reserve Assets (USD Billion) & S&P5001
Net Flows to EM Bond and Equity Funds2
1 Source: Institute for International Finance.2 Sources: EMPEA, Lipper, Thomson Reuters Datastream, Financial Times. Note: Public bond and equity fund data as at year end.
/ Confidential // 8
Secular Growth Sectors
/ Confidential // 9
Financial Services & TechnologyLimited financial infrastructure & adoption of digital fosters innovative tech-enabled financial solutions
Mobile Payments Transaction Value (USD Bil, 2016)2Financial Services vs. Mobile Penetration1
0%
50%
100%
150%
0
50
100
150
China India Turkey Kenya Mexico U.S.
ATMs per 100,000 Adults % Mobile Penetration
790
74
China U.S.
~11x
1 Source: World Bank, as of 2016.2 Refers to third‐party payments conducted through mobile transactions. For China, mobile payments exclude bank or UnionPay credit card transactions, digital wealth management, and digital finance. For the U.S., payments are in person payments on mobile between buyers and sellers, and remote payments on mobile devices. Source: McKinsey Global Institute, PicthBook, Dealogic, eMarketer, iResearch.
/ Confidential // 10
Digitization & Financial InclusionThe digitization of financial services will bring hundreds of millions of people into the formal economy
Technology Disrupting Traditional Financial Systems by:
Enabling new business models that offer expanded services and potential new revenue streams
Decreasing the cost of providing financial services and therefore transforming economics for providers
Expanding customer access and the reach of providers
Digital Disruption in Financial Services
1 Source: McKinsey Global Institute.
/ Confidential // 11
Healthcare Demand & SupplyHigh demand and lack in supply of quality healthcare is catalyzing new products and service models
Healthcare Professionals per 1,000 people3
Population with Diseases(millions)
0
5
10
15
20
25
China India Kenya Turkey Mexico U.S.0
1
2
3
4
China India Mexico Brazil
2012
2020
0
35
70
105
140
China India Mexico Brazil
2011
2030
Diabetes1 Cancer2
1 Source: World Diabetes Federation.2 Source: World Health Organization.3 Source: World Bank, most recent data available.
/ Confidential // 12
0%
5%
10%
15%
20%
China India Mexico Brazil U.S.
Private Health InsuranceTotal Healthcare Spending
46%
90%
79%67%
10%
21%
33%
0
2
4
6
8
10
12
14
1995 2012 2022
Developed Economies Emerging Economies
Healthcare ExpenditureU.S. and other Developed Market (“DM”) monetary policies have distorted capital flows and currencies
Global Healthcare Expenditure (USD Tril)2Expected Growth Rates1
1 Source: Ernst & Young for India, Brazil, Mexico; MunichRe for China; Department of Medicare for U.S..2 Sources: EMPEA, Lipper, Thomson Reuters Datastream, Financial Times. Note: Public bond and equity fund data as at year end.
/ Confidential // 13
Changing ConsumptionStructural Shifts in Consumer Business Models driven by changing demographics, consumption, & technology
Evolving Consumption Basket1 Size of Middle Class (Million)2
1 Source: HSBC. The consumption basket is represented for different per capita GDP in USD. Low income: <USD 5,000; Middle Income: USD 5,000-15,000; High Income: > USD 10,000.2 Source: Brookings, “The Emerging Middle Class in Developing Countries.”
0%
50%
100%
LowIncome
MiddleIncome
HighIncome
ConsumerDiscretionary
Transport &Comm
Health &Education
Housing &Furnishings
Food &Clothing
0
1,000
2,000
3,000
4,000
5,000
2009A 2020E 2030E
NorthAmerica
Europe
Central &SouthAmericaAsia Pacific
Middle East& Africa
/ Confidential // 14
0
5
10
15
20
25
USA Australia UK China Mexico Brazil0%
10%
20%
30%
0
300
600
900
China India US Brazil Russia
2016 2020 CAGR
EM Better Positioned than DMTech-enabled consumer models cause less disruption and enable leapfrogging in Emerging Markets
Retail Footprint: Gross Leasable Area (Sq Ft per Capita)1
Number of Digital Consumers(Million)2
1 Source: ICSC, BR Malls, General Growth Partners. As of 2017.2 Source: Statista.
New industry structures enable EM to leapfrog DM in industry evolution as lack of historical fixed asset investment is not a barrier to industry development
Less disruptive and bigger driver of growth going forward
/ Confidential // 15
Impact Investing
/ Confidential // 16
The Impact Fund Strategy – Impact Spectrum57 Stars seeks competitive financial returns and measurable social and/or environmental outcomes
57 Stars will focus on certain high impact themes without sacrificing financial returns
/ Confidential // 17
Target Themes57 Stars believes that investee companies in the following primary themes will help address societal challenges
/ Confidential // 18
Measuring the Impact ProfileIs the investment opportunity impactful enough for 57 Stars?
57 Stars applies a considered approach when evaluating the potential impact of investment opportunities
© 2018 // 57 Stars / Confidential //
CONTACTS
Steve Cowan
202.629.5730
www.57stars.netSTATEMENTS CONTAINED IN OR MADE IN CONNECTION WITH THIS PRESENTATION ARE BASED ON CURRENT EXPECTATIONS, ESTIMATES, PROJECTIONS, OPINIONS, AND BELIEFS OF THE SPONSORS OF ANY FUND THAT 57 STARS MAY RAISE (THE “FUND”). SUCH STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS, AND UNDUE RELIANCE SHOULD NOT BE PLACED THEREON. ADDITIONALLY, THIS PRESENTATION CONTAINS “FORWARD‐LOOKING STATEMENTS.” ACTUAL EVENTS OR RESULTS OR THE ACTUAL PERFORMANCE OF THE FUND MAY DIFFER MATERIALLY FROM THOSE REFLECTED OR
SUGGESTED BY SUCH FORWARD‐LOOKING STATEMENTS. CERTAIN ECONOMIC AND MARKET INFORMATION CONTAINED HEREIN HAS BEEN OBTAINED FROM PUBLISHED SOURCES PREPARED BY THIRD PARTIES AND IN CERTAIN CASES HAS NOT BEEN UPDATED THROUGH THE DATE HEREOF. WHILE SUCH SOURCES ARE
BELIEVED TO BE RELIABLE, NEITHER THE FUND, ITS SPONSORS, ADVISORS, NOR THEIR RESPECTIVE AFFILIATES OR EMPLOYEES ASSUME ANY RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION AND TAKE NO RESPONSIBILITY FOR ANY LOSS OR DAMAGE SUFFERED AS A RESULT OF ANY
OMISSION, INADEQUACY OR INACCURACY THEREIN. RECIPIENTS ACKNOWLEDGE THAT CIRCUMSTANCESMAY CHANGE AND THE CONTENTS OF THIS PRESENTATIONMAY BECOMEOUTDATED AS A RESULT.
THIS PRESENTATION IS NOT AN OFFER OR INVITATION FOR SUBSCRIPTION OR PURCHASE OF OR A RECOMMENDATION OF SECURITIES. IT DOES NOT TAKE INTO ACCOUNT THE INVESTMENT OBJECTIVES, FINANCIAL SITUATION AND PARTICULAR NEEDS OF ANY PROSPECTIVE INVESTOR. EACH PROSPECTIVE INVESTOR
SHOULD CONDUCT ITS OWN INDEPENDENT INVESTIGATION AND ASSESSMENT OF THE CONTENTS OF THIS PRESENTATION AND THEMERITS AND RISKS OF AN INVESTMENT IN THE FUND, ANDMAKE SUCH ADDITIONAL ENQUIRIES AS IT DEEMSNECESSARY OR APPROPRIATE.
UNLESS OTHERWISE INDICATED, ALL INTERNAL RATE OF RETURN ("IRR") AND TOTAL VALUE MULTIPLE ("TVM") FIGURES QUOTED FOR INVESTMENTS BY 57 STARS‐MANAGED VEHICLES ARE PRESENTED AFTER DEDUCTION OF ANY CARRIED INTEREST, MANAGEMENT FEES, AND ALLOCABLE EXPENSES (OTHER THAN TAXES
BORNE OR WHICH MAY BE BORNE BY INVESTORS) PAYABLE IN RESPECT OF SUCH INVESTMENTS, BUT BEFORE DEDUCTION OF CARRIED INTEREST, MANAGEMENT FEES, AND ALLOCABLE EXPENSES (OTHER THAN TAXES BORNE OR WHICH MAY BE BORNE BY INVESTORS) PAYABLE IN RESPECT OF THE CORRESPONDING 57
STARS‐MANAGED VEHICLE.
Heather Jensen
202.629.5852
