CD Private Equity Fund I (ASX:CD1) posted a net loss of $6.96 million for the year ended 31 March 2026, driven by a $5.14 million fair value decline in its US private equity holdings and significant foreign exchange pressures. Despite near-term setbacks, the Fund has delivered an 8.3% post-tax annual return since inception.
- Net loss of $6.96 million for FY26
- Fair value loss of $5.14 million on US Select Private Opportunities Fund
- Foreign exchange movements accounted for 26% of valuation decline
- Distributions of $0.13 per unit paid during the year
- 85.5% interest in LP with 16 active portfolio companies
Losses Reflect Market Recalibration and Currency Headwinds
CD Private Equity Fund I (ASX:CD1) recorded a net loss of $6.96 million for the financial year ended 31 March 2026, a sharp reversal from the $0.73 million profit posted the previous year. The Fund’s investment in the US Select Private Opportunities Fund, L.P. (LP) was marked down by $5.14 million, with $2.63 million of that loss stemming from an unfavourable Australian dollar appreciation against the US dollar. This foreign exchange impact alone accounted for roughly 26% of the total valuation decline, underscoring the currency risk inherent in CD1’s US-focused portfolio.
The Fund’s net tangible assets (NTA) per unit fell from $0.92 to $0.60 over the year, reflecting the combined effects of valuation adjustments and currency movements. Despite these near-term setbacks, CD1 has generated a post-tax annual return of 8.3% since inception, with an internal rate of return (IRR) of 11.2% and a total value to paid-in (TVPI) multiple of 2.30 times, signalling solid long-term value creation.
Portfolio Revaluation and Exit Activity
A material revaluation of a single portfolio company during the second half of the year weighed on results. The company’s expansion into a new European market incurred higher-than-expected costs and required additional funding at a reduced valuation. Nevertheless, the underlying business continues to demonstrate robust revenue growth in its core market, with the Fund’s manager maintaining a positive outlook on its long-term prospects.
CD1’s LP holds an 85.5% interest in a portfolio comprising 16 active companies across five underlying US private investment funds. Twelve of these companies are currently in the sales pipeline for calendar year 2026, representing approximately US$6.5 million in LP value, though timing and completion of these exits remain uncertain amid ongoing market selectivity and extended holding periods.
During FY26, the LP realised four portfolio companies, generating cash inflows of US$4.73 million. These exits supported distributions of $0.13 per unit to unitholders, amounting to $4.75 million in total. Since inception, CD1 has returned $3.085 per unit to investors, reflecting a disciplined capital management strategy focused on efficient distribution of realised gains.
Capital Management and Liquidity Position
The Fund closed the year with $1.49 million in cash and its share of the LP’s cash balance stood at US$2.61 million. Capital calls for management fees and expenses remained minimal at US$0.01 million, consistent with the Fund’s mature stage. The manager continues to balance liquidity needs with the objective of avoiding excessive cash retention, preserving flexibility to meet operating costs and respond to unforeseen events.
Governance and Risk Oversight
Governance remains a key focus, with K2 Asset Management Ltd serving as the Responsible Entity. The Board is composed of four directors, including one independent member, and is supported by compliance and risk management committees. The Fund adheres to ASX Corporate Governance Principles and maintains robust policies covering ethical conduct, continuous disclosure, and insider trading.
Significant risks identified include foreign currency exposure, illiquidity of private investments, macroeconomic fluctuations, taxation uncertainties, and key personnel retention. The Fund does not currently hedge its US dollar exposure, leaving it vulnerable to currency volatility, as evidenced by this year’s AUD appreciation impact.
Looking Ahead
With 12 companies in the sales pipeline and a portfolio concentrated in services and food and beverage sectors, the Fund’s near-term performance will hinge on exit execution and market conditions. The manager notes no material AI-related risks, viewing technology adoption as an operational enhancer rather than a disruptor. Investors will be watching how CD1 navigates the balancing act between holding for value and realising gains amid ongoing market selectivity and currency headwinds.
Bottom Line?
CD Private Equity Fund I faces a challenging FY27 as it contends with extended exit timelines and currency volatility, testing its capital management discipline and valuation resilience.
Questions in the middle?
- How will CD1 manage foreign exchange risk given its unhedged US dollar exposure?
- What impact will delayed exits have on the Fund’s liquidity and distribution capacity?
- Can the Fund’s portfolio companies sustain growth amid higher costs and evolving market conditions?