CD Private Equity Fund I Faces Profit Pressure as Portfolio Realisations Drive Cash Flow

Financial Performance and Market Context

CD Private Equity Fund I (CD1) has released its audited results for the year ended 31 March 2025, revealing a net profit of $730,728, a 43.1% decrease from the previous year. Earnings per unit fell to 2.00 cents from 3.51 cents, while net tangible assets (NTA) per unit declined to $0.92 from $1.03. Despite this contraction, the Fund maintained a distribution of 13.5 cents per unit, paid in February 2025, reflecting its commitment to returning capital to unitholders.

The Fund’s performance unfolded against a backdrop of a rebounding US private equity market, where deal values surged despite a slight dip in deal volume. Strategic investments concentrated in resilient sectors such as technology and healthcare drove activity, with megadeals and public-to-private transactions gaining momentum. However, geopolitical uncertainties, including tariffs imposed in early 2025, introduced headwinds that tempered exit strategies and increased market volatility.

Portfolio Realisations and Capital Management

Key to the Fund’s cash flow was the successful realisation of three underlying portfolio companies: Quinoa Corporation, Novatech, and Senior Living. These exits, managed through the Fund’s 85.5% interest in the US Select Private Opportunities Fund, L.P., generated substantial proceeds that funded distributions and supported the Fund’s capital structure. The Fund ended FY25 with pre-tax net assets of $33.14 million and post-tax net assets of $33.52 million.

Looking ahead, the Fund’s management anticipates a measured, asset-by-asset realisation strategy to unlock value over the next 18 to 24 months. This approach aims to realise 35–50% of the portfolio’s value within the next year, aligning with the Fund’s objective to return capital close to current NTA levels. The Fund’s post-tax annual return since inception remains robust at 11.3%, with an internal rate of return (IRR) of 11.8% and a total value to paid-in (TVPI) multiple of 2.42 times.

Risks and Governance

The Fund continues to navigate risks inherent in private equity investing, including foreign currency exposure given its US dollar-denominated assets, illiquidity of private investments, and macroeconomic uncertainties. The Fund does not hedge its foreign currency risk, which can introduce volatility in reported results. Governance remains a priority, with K2 Asset Management Ltd as Responsible Entity overseeing compliance, risk management, and transparent communication with unitholders.

The Fund’s financial statements were audited by Deloitte Touche Tohmatsu, who issued an unqualified opinion, affirming the integrity of the reported results and valuation methodologies. The valuation of the Fund’s interest in the LP relies on fair value estimates of underlying private investments, which are inherently subject to estimation uncertainty and reporting lags.

Outlook

Despite recent challenges, the Fund’s management expresses cautious optimism. The underlying private equity managers are viewed as well-equipped to capitalize on market dislocations, supporting portfolio companies through turbulent conditions. The Fund’s strategy of gradual realisations and disciplined capital management seeks to balance liquidity needs with maximising unitholder returns.