Why gain PE exposure without PE returns?

THE buzz about a new kind of bond issued by a Temasek Holdings-controlled fund is that it has the potential to give a wider range of investors access to the private equity space.

The bonds will indeed make it easier for smaller investors to enter the world of private equity, but they will not offer private equity-like returns, which raises the question of why invest in them at all. Investors who are unfamiliar with the intricacies of the private equity market may actually be better off buying similarly rated instruments that are more conventional.

Astrea III, a US$1.1 billion fund of private equity funds that was set up by Temasek, a Singapore government-owned investment firm, is marketing about US$500 million of bonds backed by its portfolio of 34 private equity funds to sophisticated investors.