On 18 February 2025, Azalea hosted our annual Astrea Investor Day 2025, a forum for Astrea Private Equity (“PE”) bond investors to understand more about PE and the performance of the Astrea PE bonds.

Azalea Overview

The webinar kicked off with a firm overview by Tricia Tan, Director, Investor Solutions & Marketing, who highlighted Azalea’s three-pronged role as Investor, Developer and Manager. Established by Temasek in 2015, Azalea has approximately US$11 billion in assets under management to date, and the Astrea platform has completed eight transactions and the Altrium platform has expanded to five PE funds. 

Reflecting on the past year, Tricia shared several key milestones for both Astrea and Altrium platforms. Azalea issued Astrea 8 in July 2024 and successfully redeemed Astrea V PE bonds in December 2024. September 2024 also marked the final closings of Altrium Co-Invest Fund I and Altrium Growth Fund I for a combined US$480 million, both surpassing their respective target fund sizes of US$200 million each.

In January 2025, Azalea also marked a decade of broadening access to PE for a wider group of investors, and celebrated our 10^th Anniversary with an appreciation dinner attended by investors, industry partners and staff.

Market Update

Justin Keh, Managing Director, Investments, highlighted several key market updates. He shared that global gross domestic product (“GDP”) growth remained stable in 2024, with continued economic growth expected in 2025 and 2026. He also spoke that U.S. and Eurozone interest rates were expected to diverge.

Justin also discussed Trump’s first weeks in office. Markets and economies continue to assess the implications of the new Administration’s executive orders and policy direction, while the PE industry evaluates their potential impact on business operations and growth strategies. He observed that despite challenges and uncertainty in the markets, PE as an asset class continued to be resilient across market cycles.

Astrea Performance Updates

Justin also shared updates on the performances of the various Astrea PE bonds which have held up amid challenging macroeconomic conditions.

• Since issuance, the Astrea V PE bonds enjoyed strong cash distributions of over US$1.5 billion since 2019, representing around 120% of the initial portfolio Net Asset Value (“NAV”). Underpinned by this strong generation of cash flows, the Astrea V bonds were fully redeemed in December 2024.
• The Astrea VI portfolio also enjoyed strong cash distributions totaling over US$1.1 billion and experienced fair value gains of US$432 million. Its Loan-to-Value (“LTV”) ratio also sits comfortably at 20.4%, well below the 50% maximum LTV ratio.
• Astrea 7 portfolio has reaped strong cash distributions of nearly US$800 million, around 41% of the starting portfolio NAV. It has also recovered from a slight decline, seeing fair value gains of US$57 million.
• Issued in July 2024, Astrea 8 portfolio has generated healthy cash distributions of over US$200 million, around 14% of the starting portfolio NAV. All the bonds continue to be rated investment grade.

Justin highlighted the credit strength of the Astrea PE bond series which saw multiple credit rating upgrades over the years. He also shared that the Astrea portfolios continued to be cash generative, which helped to de-risk Astrea transactions progressively over time. 

Life Cycle of Astrea PE Bonds

Lim Jun Jie, Director, Investor Solutions and Marketing, provided an in-depth illustration of the Astrea PE bonds life cycle using Astrea V as an example: the issuance of bonds, payment of interest, reserving mechanism for repayment of bond principal and the redemption of bonds. 

He began with an overview of PE funds and how they are used to construct Astrea portfolios. He also explained how cashflows from PE funds are used to pay bond obligations through a pre-determined order of payments, also referred to as the Priority of Payments. He continued by sharing how as reserves are accumulated, the bonds are progressively de-risked. The LTV ratio of the structure also reduces over time. Finally, at the Scheduled Call Dates, if there are sufficient cash set aside to redeem the bonds and there are no outstanding Credit Facility loans, the bonds will be fully redeemed. 

Key Takeaways

Jun Jie closed off the presentation by highlighting several takeaways from the Astrea Investor Day 2025. 

1. PE as an asset class has demonstrated resilient performance across market cycles
2. Geopolitical and macroeconomic implications from Trump 2.0 remain to be seen
3. The reserves for the various Astrea bonds continued to stay on track. All Astreas continue to fulfil their bond obligations
4. The underlying portfolios of Astrea bonds are constructed to be cash flow generative and diversified, while structural safeguards are in place to mitigate downside risks

In Conversation with Margaret and En Yaw

Margaret Lui, Azalea’s Chief Executive Officer and Chue En Yaw, Chief Investment Officer shared their insights on the Astrea bonds series. They explored topics from Astrea bond allocation to pricing, as well as the importance for investors to build portfolios that align with their own needs and risk appetites. Margaret and En Yaw also highlighted the relative relevance of bonds in all investors’ portfolios including young investors. Read the summary of the fireside chat here. 

Watch the full replay of the webinar here: 

Disclaimer: Please note that all information shared in this session is intended for your information only and is not an offer, invitation, or recommendation to purchase, hold or sell any securities. If you would like to receive any investment advice or recommendation, please do speak with a qualified financial advisor.   

The energy transition is set to reshape economies, businesses, asset prices and investment performance. In this feature piece, we unpack the current state of play and the climate policies driving investment opportunities at each stage of the energy value chain.

What Is Energy Transition?

Energy – it powers our homes, workplaces, vehicles and the production of almost everything we use. Much of the energy used today comes from burning fossil fuels like coal, oil and gas, and such generation processes make up a hefty 76%¹ of global greenhouse gas (“GHG”) emissions, which, as the science tells us, causes global warming that has far-ranging environmental and health effects.

The term “Energy Transition” refers to the global shift from fossil-based energy production and consumption to renewable energy sources such as solar, wind, hydro and geothermal power. From an investor viewpoint, there are opportunities to participate in this megatrend from both the demand and supply side of the energy system. The pathways towards achieving net-zero span across the entire energy value chain from the production, conversion, and delivery of energy to the use of energy, from infrastructure projects to existing and emerging technologies.

¹IEA (2023), Greenhouse Gas Emissions from Energy Data Explorer, IEA, Paris

Renewable Energy Generation

Halting global warming is only one driver behind the energy transition. Energy security and energy equity have come to the fore as global instability and rapid inflation threaten uninterrupted access to affordable energy.

The REPowerEU Plan is the European Commission’s proposal to end reliance on Russian fossil fuels before 2030 in response to the 2022 Russian invasion of Ukraine. At the outbreak of the invasion, almost half of EU gas imports were sourced from Russia and in the first two weeks after the invasion, gas prices were up by 180%². In conjunction with other measures taken, the REPowerEU plan is promoting substantial investment in renewable energy. With EUR$210 billion in new energy investments, the goal is to reach a 45% renewable energy mix by 2030³. This translates to at least 15% yearly increases in solar and wind electricity generation from 236 TWh for solar and 475 TWh for wind in 2023 to 621 TWh and 1,276 TWh respectively in 2030 (Exhibit 1).

²European Central Bank, The impact of the war in Ukraine on euro area energy markets
³European Commission, 18 May 2022, REPowerEU: A plan to rapidly reduce dependence on Russian fossil fuels and fast forward the green transition

Exhibit 1

Likewise, the U.S. Inflation Reduction Act (“IRA”), signed into law on 16 August 2022, and the Infrastructure Investment & Jobs Act (“IIJA”) enacted in November 2021, incentivise investment into domestic energy production, distribution and industries deemed important for U.S. national and economic security. Embedded within both legislative instruments are domestic production requirements that stipulate the need for end products and key components to be produced and assembled in the US. Together, the IRA and IIJA allocate more than US$169 billion for renewable energy technologies. The first 12 months into the IRA saw 270 new clean energy projects and  US$130 billion worth of investments unveiled⁴.

So while COP28⁵ saw over 100 countries agree to triple renewable energy capacity and double the global rate of energy efficiency by 2030, the policy stimulus to move towards renewable energy for reasons that include politics, economics and national security had been set in motion earlier. These policies send a powerful signal to investors and are driving significant tailwind for the transition away from fossil fuels.

Singapore, for example, is actively working with investors to fast-track renewable energy development in Southeast Asia (“SEA”), the fourth largest energy consumer in the world. Already home to over 100 clean energy companies, Singapore is attracting businesses to scale up in the region to meet SEA’s and its own net zero climate goals⁶. Innovative solutions include harnessing renewable energy sources in neighbouring countries, cross-border power grids, the largest Energy Storage System in SEA and other emerging low carbon alternatives such as hydrogen, geothermal and carbon capture.

⁴Reuters, 23 Nov 2023, Every country needs an Inflation Reduction Act
⁵COP28 stands for the 28th meeting of the Conference of Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC). COP is the main decision-making body of the UNFCCC
⁶EDB Singapore, An opportunity in Asia’s surging demand for renewable energy

The Electric Grid and Storage

At the rate renewable energy installations are taking place and with the electrification of cars, buildings and industry, neglected power grids risk becoming a bottleneck to the energy transition. Over and above catering to increased electricity use and variability of output, new transmission and distribution lines for solar and wind projects are needed to deliver power between deserts and seas to cities and industrial areas. The International Energy Agency has forecasted that 80 million kilometres of grids need to be built or refurbished by 2040 if country climate goals are to be met. That is equivalent to the entire existing global grid, translating into global investments of US$600 billion per year till 2030⁷.

The key difference between power systems based on fossil fuels and a system based on renewables is that energy output from solar and wind can be intermittent. That means a parallel solution is required to store the energy when the weather is favourable and to use it when it is not.

Grid-scale battery energy storage systems are best used for short-term peaks and troughs of intermittency. However, for storage capable of maintaining output for over four hours or longer, long duration energy storage (“LDES”) technologies are required, and these are currently at a lower state of technological readiness.

Again, this is where policy stimulus becomes a game changer for companies and technologies that need to get developed and deployed.

⁷International Energy Agency, Oct 2023, Electricity Grids and Secure Energy Transitions

Besides the power grids, a lot of other infrastructure is needed to make a transition to clean energy. Several countries have already announced national plans for new cars to be zero-emissions by 2035. To give consumers confidence in electric vehicles (“EVs”), investment must be made in EV charging infrastructure. The IIJA not only has billions going out to states to build that infrastructure, but to also upgrade public transit vehicles such as buses and trains.

Another regulatory development that has yet to be mentioned is the U.S. CHIPS and Science Act, which has authorised close to US$200 billion on building and research and development (“R&D”) capabilities. These include R&D technologies for advanced manufacturing, material science and energy efficiency. A good example is new ways of making steel and concrete without the huge amount of pollution it produces.

Retrofitting older buildings will remain a challenge for the U.S. and the EU. Any innovation that improves the energy efficiency for building construction, heating, cooling, lighting as well as all appliances and equipment installed in them will go a significant way in reducing energy consumption. Buildings account for as much as 40% of the EU’s energy use, with most being heated by fossil fuels⁸. In the wake of Russia’s invasion of Ukraine, Europe ramped up installation of high-efficiency electric heat pumps to help eliminate its dependence on natural gas. Today, more than a dozen European nations offer subsidies to purchase heat pumps. Tax credits and subsidies not only shape market demand, but they incentivise manufacturers and entrepreneurs. Technologies can now be developed to a point where the private sector is sufficiently de-risked to pick it up and run with it.

⁸Reuters, Mar 2024, EU Parliament approves law to make buildings more energy efficient

Conclusion

The energy system is changing at a pace not seen before. Declining costs of renewable energy technologies, coupled with favourable regulatory policies and increasing consumer demand for clean energy, have created a conducive environment for investment in this sector. Global investment in energy transition technologies hit US$1.8 trillion in 2023, up 17% from a year earlier. Investment in new renewable energy projects grew 8% to US$623 billion⁹.

Global private capital investment in the energy transition came to US$496 billion in the 12 months since the IRA came into effect¹⁰.

As investors warm up and plug-in (pun intended) to the fast-changing energy transition landscape, navigating the opportunity set for financial returns and making a real dent in carbon emissions will involve titrating between the dynamics of policy, technology and market demand.

⁹BloombergNEF, Jan 2024, Global Clean Energy Investment Jumps 17%, Hits $1.8 Trillion in 2023
¹⁰S&P Global Commodity Insights, Sep 2023, Financing the energy transition

Astrea Investor Day 2024 offers a platform for Astrea bond investors to delve into the nuances of private equity ("PE") bonds and the performance of Astrea bonds. The event featured a series of presentations that highlighted Azalea’s milestones and market updates, as well as a fireside chat with Christopher Tan, CEO of Providend, on strategies for retirement investing in the current economic environment.

Azalea Overview

The webinar kicked off with an overview by Azalea's Chief Investment Officer, Chue En Yaw, who highlighted the role that Azalea plays in the private markets space. Azalea, which was established by Temasek in 2015, has US$9 billion in assets under management and has completed five transactions on the Astrea Platform. The Altrium Platform, which is a series of private equity fund of funds and a direct co-investment fund, has seen significant growth in assets under management since the first fund launch in 2019.

Key milestones included the successful redemption of Astrea IV PE Bonds in 2023, marking a significant achievement in Azalea's journey towards providing accessible private equity investment solutions. On the Altrium platform, Azalea has successfully held the first closing for Altrium Growth Fund I and Altrium Co-Invest Fund I in December 2023 for a combined US$356 million. Finally, the inaugural sustainability report underscored Azalea's commitment to responsible investing, aligning with global ESG standards.

Market Update

En Yaw shared that economic growth remained resilient in 2023 despite challenges like bank collapses and inflationary pressures. He pointed out the easing of inflation and moderation in interest rates going into 2024, potentially improving the investment climate for PE, which has continued to outperform public markets over the long-term. Elaborating on the PE exit environment, he noted that despite market challenges, PE continues to exhibit resilience with multiple exit channels including trade sales, secondary buyouts, and IPOs. He highlighted the Astrea portfolios’ distributions from successful exits over the past year, including the notable IPO of Birkenstock, the trade sale of VMware, and the secondary buyout of Macrobond.

Astrea Performance Updates

Lim Jun Jie, Director in the Investor Solutions & Marketing team, provided a quick refresher on the Astrea bonds, before diving into a detailed analysis of Astrea bonds' performance, underscoring our structured approach to risk mitigation and consistent cash flow generation.

• The full redemption of Astrea IV bonds was highlighted as a testament to the program's success, with over US$1.2 billion in cash distributions, representing ~108% of the initial portfolio NAV
• Astrea V also showed strong performance with over US$1.4 billion in cash distributions and significant fair value gains
• Astrea VI has generated strong cash distributions totalling US$900 millionrepresenting ~63% of the initial portfolio NAV since its issuance in 2021
• Astrea 7, despite broader market declines, has recovered to produce healthy cash distributions of over US$500 million, ~27% of the initial portfolio NAV, since its launch in 2022

 The multiple rating upgrades received by Astrea bonds over the years reflect the strong credit quality of the bonds, despite market disruptions and the inflationary environment.

Fireside Chat with Christopher Tan

Azalea’s Managing Director of Investor Solutions & Marketing, Tang Hsiao Ching, hosted a fireside chat with Christopher Tan, CEO of Providend, who offered insights into retirement planning and investment strategies. He highlighted the importance of building a diversified retirement portfolio, tailored to withstand various market conditions. Read the summary of the fireside chat here.

Watch the full replay of the webinar here:  

Disclaimer: Please note that all information shared in this session is intended for your information only and is not an offer, invitation, or recommendation to purchase, hold or sell any securities. If you would like to receive any investment advice or recommendation, please do speak with a qualified financial advisor.