CD Private Equity Fund II Reports $0.21M Profit, 16c Distributions Amid Market Headwinds

A Year of Transition for CD Private Equity Fund II

CD Private Equity Fund II (CD2) has released its audited results for the financial year ended 31 March 2025, revealing a significant contraction in profitability amid a complex US private equity landscape. The Fund’s net profit after tax plummeted to $0.21 million, a stark contrast to the $10.47 million recorded in the prior year, translating to a dramatic fall in earnings per unit from 19.96 cents to just 0.40 cents.

Despite this sharp profit decline, the Fund maintained its commitment to unitholders by distributing a total of 16 cents per unit over the year, reflecting proceeds from the realisation of eight underlying portfolio companies. These exits, spanning sectors such as healthcare, technology, and industrial services, underpin the Fund’s ongoing capital return strategy.

Navigating a Challenging US Private Equity Market

The Fund’s primary investment vehicle, the US Select Private Opportunities Fund II, LP (LP), in which CD2 holds an 87.3% interest, experienced a mixed environment. While the US private equity market saw a rebound in deal value and strategic activity, geopolitical uncertainties, particularly tariffs imposed in early 2025, introduced headwinds that tempered exit opportunities and valuation growth.

Nevertheless, the LP recorded a fair value gain of approximately $3.43 million during FY25, including a substantial unrealised foreign currency translation gain of $3.25 million, reflecting the Fund’s exposure to US dollar fluctuations. The Fund’s net tangible assets (NTA) per unit declined to $1.39 from $1.54, consistent with the overall reduction in net assets to $72.81 million.

Capital Management and Portfolio Outlook

Capital management remains a focal point for CD2, with the Fund holding $4.9 million in cash and a further US$5 million in LP cash reserves at year-end. The Fund’s uncalled capital commitments stand at US$1.7 million, reflecting a cautious approach to future capital deployment amid market uncertainties.

Looking ahead, the Fund’s portfolio consists of 34 companies, with 23 deemed significant in value. The Manager signals a pipeline of potential sales in 2025, which could provide liquidity and strategic flexibility. The Fund continues to emphasize investments in resilient sectors and expects to balance natural asset sales with potential secondary market opportunities depending on pricing and market conditions.

Governance and Risk Oversight

Governance structures remain robust, with K2 Asset Management Ltd as Responsible Entity overseeing operations. The Board comprises a mix of independent and non-independent directors, supported by an independent Compliance Committee and risk management framework. The Fund acknowledges key risks including foreign currency exposure, private investment illiquidity, and macroeconomic uncertainties, all of which are actively monitored.

Auditor Deloitte Touche Tohmatsu has provided an unqualified opinion on the financial statements, highlighting the complexity and estimation involved in valuing the Fund’s interest in the LP, given the illiquid nature of underlying investments and timing differences in valuation reporting.

A Long-Term Perspective Amid Short-Term Volatility

Since inception, CD Private Equity Fund II has delivered a post-tax annual return of 10.2% per annum and an internal rate of return of 11.0%, with a total value to paid-in capital multiple of 2.41 times. While FY25’s results reflect a challenging year, the Fund’s long-term performance and disciplined capital management provide a foundation for navigating ongoing market volatility.