Nash Waterman
Head of AIP Private Markets Secondaries
18 years industry experience
Mercedes Fernandez Elias
Managing Director
17 years industry experience
Daniel Wieder
Executive Director
14 years industry experience
Brian Towsen
Executive Director
26 years industry experience
Yash Gupta
Executive Director
10 years industry experience
John Wolak
Senior Advisor
34 years industry experience
Ashbridge Strategy | Morgan Stanley Investment Managment

Discover Morgan Stanley
Ashbridge Strategy

A leader in GP-Led
Continuation Transactions

 

The Ashbridge strategy is focused on GP-led single asset continuation transactions, targeting the highest performing assets in middle market private equity funds.

Private Equity GP-Led continuation transactions involve a recapitalization of a single asset managed by a general partner.

These transaction seek to maximize the value of unrealized assets by providing additional capital and time, and promoting enhanced alignment with the lower middile market GP.

LP SECONDARIES make up the most common segment of the market. Thesse transactions consist of LPs that sells their assets to a secondary buyer.

GP-LED SECONDARIES are transactions involving sale of one or more assets from an existing vehicle to a new vehicle that the GP will continue to manage.

SINGLE-ASSET GP-LED TRANSACTIONS are the most complex transactions, often requiring bespoke solutions and thorough diligence of both the GP and the asset.

 

Why Ashbridge


Differentiated Strategy

Ashbridge II has a unique focus on complex transformational secondary transactions that often entail a restructuring or recapitalization of a private equity managed asset or select group of assets.


Experienced Team

Managed by a deep, experienced, and aligned boutique team – Private Equity Secondaries Team that has been working together for over a decade.


Growing Market Opportunity

The Secondaries market has more than tripled in size since 2013, with the growth of the transformational secondaries segment exploding to represent one third of the market.


Disciplined Approach

Time-tested, sponsor-driven philosophy enhanced by asset-level selection criteria and an established investment process incorporating robust sourcing, a multi-pronged ESG evaluation, rigorous underwriting and expeditious execution.


Distinguished Track record1

Ashbridge is a pioneer in GP-Led transactions, with over 50 total transations since 2006.


Morgan Stanley Advantage2

Ashbridge benefits from being part of a leading financial institution. Morgan Stanley's platform gives Ashbridge a sourcing edge and broad and diversified resources.

We employ a time-tested, multi-stage approach to identifying potential investment opportunities.

1

Lower Middle
Market Focus

Enterprise Value
$100M - $500M

Transaction Size
$75M - $500M

2

Specialized Strategy

Seek to invest with GPs that have a specialized strategy (ex: sector focused)

3

Proactive GP Outreach

Employ a proactive approach to generating proprietary and relationship-driven deal flow

4

Compelling Historical Track Record1

High standard for GP’s historic track record and demonstrated ability to execute on value creation plans with specific asset(s)

5

Highly Appealing Asset(s) Requiring Secondary Solution

Attractive asset performance to date under the existing GP GP has a clear strategy to potentially unlock additional value

6

Proactive GP Outreach

Employ a proactive approach to generating proprietary and relationship-driven deal flow


Environmental

Carbon emissions Air
and water pollution
Waste management


Social

Community relations
Labor standards
Healthy and safety record


Governance

Board independence
Disclosure
Tax strategy

We are highly selective and intentional about adding positions to the portfolio and managing risk. We continue to focus on companies that provide essential products and services for stable end markets, which typically prove more resilient throughout economic cycles.

Meet the team

 

Contact Us

Interested in learning more?
Please contact us today.

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The Ashbridge strategy is focused on GP-led single asset continuation transactions, targeting the highest performing assets in middle market private equity funds.

GP-LED SECONDARIES

Tailored solution which seeks to enhance alignment and optimize outcomes for all stakeholders

MID-MARKET

Highest conviction assets held by well-performing private equity sponsors Asset-level selectivity enables superior due diligence and highly curated portfolio

SINGLE ASSET

More attractive supply/demand dynamics Fewer specialized buyers, and opportunity for greater proprietary deal flow

Catch up on content from the Ashbridge team

What is a single-asset GP-led continuation transaction?

Private Equity GP-Led Continuation transactions involve a recapitalization of a single asset managed by a general partner.

These transactions seek to maximize the value of unrealized assets by providing additional capital and time, and promoting enhanced alignment with the lower middle market GP.

LP SECONDARIES make up the most common segment of the market. These transactions consist of LPs that sells their assets to a secondary buyer.

GP-LED SECONDARIES are transactions involving the sale of one or more assets from an existing vehicle to a new vehicle that the GP will continue to manage.

SINGLE-ASSET GP-LED TRANSACTIONS are the most complex transactions, often requiring bespoke solutions and thorough diligence of both the GP and the asset.

“GP-led secondaries offer the best access to top-quality assets in the middle market. In a growing universe of investable assets, we can be highly selective and intentional about adding positions...”

Nash Waterman

Head of Private Equity Secondaries, Morgan Stanley Investment Management

Why Ashbridge

Differentiated Strategy

Ashbridge II has a unique focus on complex transformational secondary transactions that often entail a restructuring or recapitalization of a private equity managed asset or select group of assets.

Experienced Team

Managed by a deep, experienced, and aligned boutique team – Private Equity Secondaries Team that has been working together for over a decade.

Growing Market Opportunity

The Secondaries market has more than tripled in size since 2013, with the growth of the transformational secondaries segment exploding to represent one third of the market.

Disciplined Approach

Time-tested, sponsor-driven philosophy enhanced by asset-level selection criteria and an established investment process incorporating robust sourcing, a multi-pronged ESG evaluation, rigorous underwriting and expeditious execution.

Distinguished Track record1

Our Corporate Engagement Strategists influence companies toward greater sustainability and corporate governance

Morgan Stanley Advantage2

Ashbridge benefits from being part of a leading financial institution. Morgan Stanley's platform gives Ashbridge a sourcing edge and broad and diversified resources.

We employ a time-tested, multi-stage approach to identifying potential investment opportunities.

1

Lower Middle Market Focus

Enterprise Value
$100M - $500M

Transaction Size
$75M - $500M

2

Specialized Strategy

Seek to invest with GPs that have a specialized strategy (ex: sector focused)

3

Proactive GP Outreach

Employ a proactive approach to generating proprietary and relationship-driven deal flow

4

Compelling Historical Track Record1

High standard for GP’s historic track record and demonstrated ability to execute on value creation plans with specific asset(s)

5

Highly Appealing Asset(s) Requiring Secondary Solution

Attractive asset performance to date under the existing GP GP has a clear strategy to potentially unlock additional value

6

Manager Alignment

GP reinvests in the transaction via increased commitment or carry roll-over
Meaningful transaction to the sponsor

Key Areas of Engagement


Environmental

Carbon emissions Air
and water pollution
Waste management


Social

Community relations
Labor standards
Healthy and safety record


Governance

Board independence
Disclosure
Tax strategy

Portfolio Managers

Contact Us

Interested in learning more?
Please contact us today.

Contact Us
 

1 Past performance is not indicative of future results.

2 Diversification does not eliminate the risk of loss. Subject to third party confidentiality obligations and internal policies and procedures established by Morgan Stanley, including information barriers and allocation policies, to manage potential and actual conflicts of interest and/or in respect of regulatory requirements.

THIS IS A MARKETING COMMUNICATION. PLEASE REFER TO THE CONFIDENTIAL OFFERING MEMORANDUM OF THE FUND AND ITS SUPPLEMENTS BEFORE MAKING ANY FINAL INVESTMENT DECISIONS.

The document has been prepared solely for information purposes and does not constitute an offer or a recommendation to buy or sell any interest in Ashbridge Transformational Secondaries Fund II LP (“the Main Fund”), Ashbridge Transformational Secondaries Fund II (Parallel Fund III) (the “Parallel Fund III”) or Ashbridge Transformational Secondaries Fund II (Parallel II), LP (the “Parallel Fund I”; the Main Fund, Parallel Fund III and Parallel Fund I and any parallel or related funds, collectively, the “Fund” or “Ashbridge II”) and where the context so requires, any other parallel fund, as well as their respective feeder funds and investment vehicles, as described more fully in the Fund’s offering materials. The material contained herein has not been based on a consideration of any individual client circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice. To that end, investors should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision. Except as otherwise indicated herein, the views and opinions expressed herein are those of Morgan Stanley Investment Management, are based on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring, after the date hereof. This communication is a marketing communication. It is not a product of Morgan Stanley’s Research Department and should not be regarded as a research recommendation. The information contained herein has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. All information contained herein is proprietary and is protected under copyright law.

This information is being provided to the recipient as a pre-qualified financially sophisticated prospective investor in order to provide the recipient with information about Morgan Stanley Alternative Investment Partners LP (“AIP”) or one of its affiliates (“Morgan Stanley Secondaries Team”), an investment manager that manages the Fund, along with other portfolios primarily invested in private equity funds and other private equity investments. This is not an offer to buy or sell, or a solicitation of an offer to buy or sell, any security or instrument or to participate in any trading strategy.

If any such offer of interests is made, it will be made only pursuant to a definitive confidential offering memorandum, which contains material information not contained herein, as a private placement under the U.S. securities laws, and information that supersedes the information contained herein will be furnished to qualified prospective investors at their request. Any interests offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act”), the securities laws of any state of the United States, or any non-U.S. securities laws, and will be offered and sold for investment only to qualifying recipients of the Memorandum pursuant to the exemption from the registration requirements of the Securities Act provided by section 4 (a) (2) thereof and/or regulation promulgated thereunder, and in compliance with any applicable non-U.S. Securities laws. The Fund will rely on an exemption pursuant to Section 3(c) (7) of the Investment Company Act. The interests may not be transferred or resold except as permitted under the Securities Act and any applicable state or non-U.S. securities laws, pursuant to registration or exemption therefrom. The transferability of the interests will be further restricted by the terms of an Agreement of Limited Partnership. Moreover, the terms of an investor’s interest will be governed by the terms of an Agreement of Limited Partnership.

ANY LOSSES IN THE FUND WILL BE BORNE SOLELY BY INVESTORS IN THE FUND AND NOT BY MORGAN STANLEY AND ITS AFFILIATES. THEREFORE, MORGAN STANLEY'S LOSSES IN THE FUND WILL BE LIMITED TO LOSSES ATTRIBUTABLE TO THE OWNERSHIP INTERESTS IN THE FUND HELD BY MORGAN STANLEY AND ITS AFFILIATES IN THEIR CAPACITY AS INVESTORS IN THE FUND. INTERESTS IN THE FUND ARE NOT INSURED BY THE FDIC AND ARE NOT DEPOSITS, OBLIGATIONS OF, OR ENDORSED OR GUARANTEED IN ANY WAY, BY MORGAN STANLEY AND ITS AFFILIATES. MORGAN STANLEY AND ITS AFFILIATES DO NOT, DIRECTLY OR INDIRECTLY, GUARANTEE, ASSUME OR OTHERWISE INSURE THE OBLIGATIONS OR PERFORMANCE OF THE FUND DESCRIBED HEREIN OR ANY COVERED FUND IN WHICH SUCH FUND INVESTS. INVESTORS SHOULD READ THE MEMORANDUM BEFORE INVESTING IN THE FUND. MORGAN STANLEY IS THE SPONSOR OF THE FUND FOR PURPOSES OF SECTION 619 OF THE DODD-FRANK ACT (“THE VOLCKER RULE”). A DESCRIPTION OF THE ROLE AND SERVICES OF MORGAN STANLEY IS PROVIDED IN THE OFFERING MEMORANDUM.

Before deciding to invest in the Fund, the recipient should consider all relevant investment considerations and any conflicts of interest of Morgan Stanley Secondaries Team. The recipient should have the financial ability and willingness to accept the risks associated with an investment in the Fund for an indefinite period of time. An investment in the Fund is speculative and involves significant risks. These risks include, but are not limited to, the following: Each investment which would be made on behalf of the Fund would be illiquid, and an investor may not be able to transfer its interest in any such investment because of restrictions on transferability of interests. Any potential return on an investor’s investment will be reduced by the fees and expenses payable to Morgan Stanley Secondaries Team, as well as those fees and expenses payable pursuant to the terms of each investment made on behalf of the Fund, which may be substantial. In addition, investors unable to meet their funding obligations with respect to any such investment in a timely manner may face severe default penalties, including the forfeiture of any distributions to which an investor may be otherwise entitled. The terms of any investment shall be governed by definitive agreements. Any decision to invest should be made solely in reliance upon such agreements.

The Fund is actively managed without reference to a specific benchmark. Any benchmark indices presented in this document are provided for informational purposes only. Certain information contained herein constitutes forward-looking statements, which can be identified by the use of terms such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue,” or “believe” (or the negatives thereof) or other variations thereon. Due to various risks and uncertainties, including, but not limited to, those set forth herein, actual events or results or actual performance of the Fund may differ materially from those reflected or contemplated in such forward-looking statements. Except as otherwise indicated herein, the views and opinions expressed herein are those of Morgan Stanley AIP Private Markets, are based on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring, after the date hereof. They are subject to change based on market, economic and other conditions and may not actually come to pass.

Morgan Stanley does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. It was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws. Federal and state tax laws are complex and constantly changing. You should always consult your own legal or tax advisor for information concerning your individual situation.

This communication is only intended for and will be only distributed to persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations.

RISK FACTORS

This is a summary of various risks associated with investing in the Fund. This summary is not, and is not intended to be, a complete enumeration or explanation of the risks involved. The recipient should consult with its own advisors before deciding whether to invest in the Fund. In addition, to the extent that the investment program of the Fund changes and develops over time, additional risk factors not described here may apply. Only a recipient who understands the nature of the investment, does not require liquidity in the investment for the whole of the investment’s extended term, and has sufficient resources to sustain the loss of its entire investment should consider making the kinds of investments described in this presentation.

Developments in Financial Services Industry and Impact on Morgan Stanley. In the event of any market turmoil and weakening of the financial services industry, Morgan Stanley’s financial condition may be adversely affected and it may be subject to legal, regulatory, reputational and other unforeseen risks that could have an adverse effect on Morgan Stanley’s business and operations. To the extent that any such events occur, Morgan Stanley, its affiliates and employees may be unable to fulfill their funding obligations to Ashbridge II, one or more of the Fund’s key investment professionals may cease to be associated with the Fund and the Fund may suffer other adverse consequences, each of which could adversely affect the business of the Fund, restrict the Fund’s investment activities and impede the Fund’s ability to effectively achieve its investment objectives. In addition, the cost and availability of funding available to the Fund may be adversely affected by illiquidity and wide credit spreads in the credit markets. Continued turbulence in the U.S. and international markets and economy may adversely affect the Fund.

Reliance on Third-Party Fund and Portfolio Company Management. The Fund will invest with underlying managers who are unrelated to Morgan Stanley and its affiliates and, indirectly, in investments selected by such unrelated managers. Although the Adviser will attempt to evaluate each prospective portfolio investment based on criteria such as the performance history of such portfolio investment, and its respective manager, if applicable, as well as such portfolio investment’s investment strategies, the past performance of portfolio investment, and its manager, if applicable, may not be a reliable indicator of future results. Neither the Adviser nor the Team will have an active role in the day-to-day management of portfolio investments in which Ashbridge II invests. Moreover, the Fund may not have the opportunity to evaluate the specific investments made by any portfolio investment before they are made, and may not be able to dispose of its investment in a portfolio investment, including in situations where the Adviser is dissatisfied with such portfolio investment’s performance. Managers of portfolio investments may make investment decisions that are inconsistent with their prior investment history or the applicable portfolio investment’s offering and governing documents, and the ability of the Adviser to timely detect or react to such deviation may be limited. Accordingly, the returns of the Fund depend on the performance of such unrelated underlying managers and would be substantially adversely affected by the unfavorable performance of such underlying managers. The performance of a portfolio investment may also rely on the services of a limited number of key individuals, the loss of whom could significantly adversely affect the portfolio investment’s performance. Similarly, although the Fund may seek management rights in portfolio investments in which the Fund invests, the Fund will not control these portfolio investments and generally will not have the opportunity to evaluate the specific investments made by any portfolio investment.

Multiple Levels of Expense. Each of Ashbridge II and the portfolio investments may incur their own management and/or administrative fees, costs and expenses, as well as carried interest payments on realized and, in the case of portfolio investments, possibly unrealized appreciation and other income. These fees, costs and expenses will result in greater expense to the Limited Partners than if the Limited Partners were able to invest directly in portfolio investments.

Risk of Loss. There can be no assurance that the operations of Ashbridge II will be profitable, that Ashbridge II will be able to avoid losses or that cash from operations will be available for distribution to the Limited Partners. The possibility of partial or total loss of capital of the Fund exists, and prospective investors should not subscribe unless they can readily bear the consequences of a complete loss of their investment. The Fund will have no source of funds from which to pay distributions to the Limited Partners other than income and gains received on portfolio investments and the return of capital. Any losses in the Fund are borne solely by investors in the Fund and not by Morgan Stanley or its affiliates (other than in their capacities as investors in the Fund).

Illiquidity of Interests; Limitations on Transfer; No Market for Interests. A Limited Partner will not be permitted to transfer its interest in the Fund without the consent of the General Partner. Furthermore, the transferability of interests will be subject to certain restrictions and will be affected by restrictions imposed under applicable securities laws. There is currently no market for the interests, and it is not contemplated that one will develop. The interests should only be acquired by investors able to commit their funds for an indefinite period of time, as the term of the Fund could continue for up to 11 years. In addition, there are very few situations in which a Limited Partner may withdraw from the Fund.

Illiquidity of Investments. The holding period for portfolio investments may be longer than the Fund initially expects upon consummating such portfolio investment. Given the lack of visibility into the ultimate exit events and the need of certain portfolio companies to achieve particular performance milestones prior to exit, there is a risk that the Fund’s anticipated exit from a portfolio investment may be delayed. There may be significant restrictions on the transfer of interests in portfolio investments and, as a result, there is no assurance that Ashbridge II will be able to transfer these interests. Portfolio investments may also be prohibited by law or contract from selling their investments for a period of time or otherwise be restricted from disposing of such investments. The investments made by such portfolio investments may require a substantial length of time to liquidate. Consequently, there is a significant risk that Ashbridge II and portfolio investments will be unable to realize their investment objectives by sale or other disposition of such investments at attractive prices, or will otherwise be unable to complete any exit strategy with respect to such investments.

Valuations. Because there is no public market for private equity investments, they are difficult to value. Disruption and volatility in U.S. and global markets have created and may continue to create additional challenges in accurately valuing such investments. In addition, accounting guidance has changed and may continue to change the way that valuations must be made. Ashbridge II relies on the valuations made by managers of Portfolio Investments. Changes in a portfolio investment’s manager’s valuation methodology in response to new accounting guidance may make it difficult for Ashbridge II to analyze such manager’s performance over time. In addition, because the accounting guidance is recent, there may be inconsistency across managers in the way such guidance is implemented. Apart from such market events and accounting guidance, the valuation process inherently involves a degree of subjectivity, particularly in illiquid markets, where the exercise of judgment is critical to determining fair value. For these and other reasons, Ashbridge II may make investment decisions based on imprecise, incomplete or inaccurate valuation information, which may adversely affect Ashbridge II and its investors.

Limitations of Investment Performance Data. It is the practice of AIP to mark its investments to reflect the carrying values as reported by the general partners or managers of portfolio investments, rather than the cost of the secondary investments, and the investment performance data presented for the Fund’s predecessor fund is derived using such carrying values. This practice results in the IRR data being impacted initially by the purchase discounts (or premiums) applicable to the acquisition of the portfolio investments; over time, the IRR data will increasingly reflect the performance of the underlying investments. As a result, the reliability of the investment performance data of the Fund’s predecessor fund is subject to limitations. Past performance is not necessarily indicative of future results, particularly in an evolving market such as secondary investing.

Availability of Investment Opportunities by the Fund. The business of identifying and structuring secondary investments in portfolio companies and private equity funds of the types contemplated by Ashbridge II is competitive and involves a high degree of uncertainty. Furthermore, the availability of investment opportunities generally is subject to market conditions, the prevailing regulatory and political climate and competition from other investors, including investors that have lower cost of funds, more available capital or access to funding sources that are not available to the Fund and who may have higher risk tolerances or different risk assessments, which may allow them to consider a wider variety of investments or different return targets than those of the Fund. The Fund may incur significant expenses investigating potential investments which are ultimately not consummated, including expenses relating to due diligence, transportation, legal expenses, and the fees of other third-party advisors. Even if attractive investment opportunities are identified by the Team, there is no certainty that the Fund will be permitted to invest in such opportunity (or invest in such opportunity to the fullest extent desired). Moreover, upon a successful bid, legal or contractual transfer restrictions, including rights-of-first-refusal, change-of-control, and other similar provisions applicable to such investment may prevent the Fund from acquiring all or a portion of such investment. Completing the acquisition of an interest in a private equity fund generally requires the consent of the general partner of that fund, and there is no assurance that the Fund will be able to obtain such consent.

Furthermore, Transformational Secondaries may require the renegotiation of certain terms with the holders of the target investors and there is no assurance that any such renegotiation will lead to the successful completion of an investment. Accordingly, there can be no assurance that the Fund and its portfolio investments will be able to identify and complete attractive investments in the future or that they will be able to invest fully their subscriptions or commitments, as the case may be. In addition, the Adviser may not be able to obtain as favorable terms as it would otherwise in a less competitive investment environment. Finally, the current private equity environment has become even more competitive as hedge funds have been competing for investment opportunities that have traditionally been targeted by private equity funds, and competition for appropriate investment opportunities may continue to increase.

Potential Significant Impact of the Performance of a Limited Number of Investments. Ashbridge II expects to participate in multiple portfolio investments. However, it is possible that the Fund will make investments in a limited number of portfolio investments and such portfolio investments may, in turn, make investments in a limited number of companies. Some portfolio investments may have strategies which may limit diversification. Furthermore, the managers of portfolio investments may have similar investment objectives and such managers may compete for and make overlapping investments in, and certain of the Portfolio Investments may participate in, the same portfolio companies, including, without limitation, through leveraged buyouts structured as “club” deals, resulting in the Limited Partners having increased exposure with respect to these portfolio investments. A consequence of a limited number of investments or of similar investments is that the aggregate returns realized by the Limited Partners may be substantially adversely affected by the unfavorable performance of a small number of these investments and a single investment could have a disproportionate effect on the performance of the Fund. In addition, the aggregate return on a Limited Partner’s investment in the Fund would likely be substantially adversely affected by the unfavorable performance of investments generally. Moreover, identification of attractive investment opportunities by portfolio investments in which the Fund invests is difficult and involves a high degree of uncertainty.

Expedited Transactions. Increasingly, timetables for secondary investments are narrowing and investment analyses and decisions by the Investment Committee may frequently be required to be undertaken on an expedited basis to take advantage of investment opportunities. In such cases, the information available to the Adviser at the time of an investment decision may be limited and the Adviser may not have access to detailed information regarding the investment opportunity, in each case, to an extent that may not otherwise be the case had the Adviser been afforded more time to evaluate the investment opportunity. Therefore, no assurance can be given that the Adviser will have knowledge of all circumstances that may adversely affect an investment.

Regulation as a Bank Holding Company

Morgan Stanley is a bank holding company (a “BHC”) under the U.S. Bank Holding Company Act of 1956, as amended (the “BHCA”). Morgan Stanley has also elected to be treated as a “financial holding company” (a “FHC”) under the BHCA, which is a status available to BHCs that meet certain criteria. FHCs may engage in a broader range of activities than BHCs that are not FHCs. However, the activities of FHCs and their affiliates remain subject to certain restrictions imposed by the BHCA and related regulations. These restrictions have the potential to materially and adversely affect the Fund by, among other things, affecting the Adviser’s ability to pursue certain strategies within the Fund’s investment program or trade in certain securities. Moreover, Morgan Stanley may cease in the future to qualify as, or remain in compliance with the requirements to be treated as, an FHC, which, were the Fund to be “controlled” by Morgan Stanley within the meaning of the BHCA, may subject the Fund to additional restrictions or may result in the restructuring or dissolution of the Fund. Moreover, there can be no assurance that the BHCA or other bank regulatory requirements applicable to Morgan Stanley or the Fund will not change, or that any such change will not have a material adverse effect on the Fund. Morgan Stanley, the Adviser and the Fund may be able to rely on other statutory and regulatory provisions in order to maintain compliance with the BHCA to the extent applicable to the Fund. Morgan Stanley reserves the right to rely on any such applicable exemptions. The BHCA and Federal Reserve regulations and interpretations thereunder may be amended over the term of the Fund, which could also result in further restrictions on the activities or investments of the Fund.

At any time, including in the event of any change to the BHCA, or applicable regulations and interpretations under the BHCA, Morgan Stanley may in the future, in its sole discretion and without notice to the Limited Partners, take additional steps it deems necessary, advisable or appropriate in its sole discretion for the Adviser to comply with laws or regulations (including the BHCA) or to reduce or eliminate the impact or applicability of these bank regulatory restrictions to which the Adviser or other funds and accounts managed by the Adviser or any of its affiliates (i) are subject or (ii) will be subject upon engaging in a new business transaction. At any time, the Fund or the Adviser may be restructured in order to reduce or eliminate the impact or applicability of these bank regulatory restrictions on the Fund or other funds and accounts managed by the Adviser and its affiliates.

The Volcker Rule. Section 619 of the Dodd-Frank Act, commonly known as the “Volcker Rule,” and regulations to implement the Volcker Rule issued by the U.S. federal financial regulators in December 2013 (“Implementing Regulations”), impose a number of restrictions on Morgan Stanley and its affiliates that affect the Fund, the General Partner, the Adviser and the Limited Partners. For example, to sponsor and invest in the Fund, Morgan Stanley will comply with the Implementing Regulations’ “asset management” exemption to the Volcker Rule’s prohibition on sponsoring and investing in covered funds. Under this exemption, investments made by Morgan Stanley (aggregated with certain affiliate investments) in the Fund will be limited to 3% of both the total number and aggregate fair market value of the outstanding ownership interests of the Fund (the “per-fund limit”). To the extent that Morgan Stanley holds an ownership interest in any feeder funds, the per-fund limit will be calculated at the Fund level, including both direct investments in the Fund and indirect investments in the Fund through any feeder funds, calculated on a pro rata basis. In addition, total investments in all covered funds by Morgan Stanley (aggregated with certain affiliate and employee investments) in reliance on the asset management exemption and certain other exemptions are limited to 3% of Morgan Stanley’s Tier 1 capital (the “aggregate investment limit”). A change in Morgan Stanley’s Tier 1 capital may mean that retention of some or all of the ownership interest in the Fund by Morgan Stanley or certain of its affiliates and employees would violate the aggregate investment limit. In addition, the withdrawal or default of an investor in the Fund or an excuse or election not to participate in a call for capital contributions by an investor in the Fund may cause a violation of the per-fund limit by Morgan Stanley. To the extent that the retention of an interest in the Fund or further investment in the Fund by Morgan Stanley or certain of its affiliates and employees would result in a violation of either the per-fund limit or the aggregate investment limit, then Morgan Stanley and certain of its affiliates and employees may be required to dispose of, transfer or otherwise reduce holdings in some or all of their respective ownership interests in the Fund or may be prohibited, entirely or partially, from making further investments in the Fund.

Other Volcker Rule restrictions also will apply. As noted above, the Volcker Rule and the Implementing Regulations restrict Morgan Stanley and its affiliates from entering into covered transactions, as defined in Section 23A of the U.S. Federal Reserve Act, as amended, with the Fund or any covered fund the Fund controls. For example, Morgan Stanley is prohibited from providing loans and hedging transactions with extensions of credit or other credit support to the Fund. Further, any permitted transactions between Morgan Stanley and its affiliates and the Fund will be subject to the “market terms” requirements of Section 23B of the U.S. Federal Reserve Act.

Other Legal, Tax and Regulatory Risks. The Adviser is part of a larger firm with multiple business lines active in multiple jurisdictions that are governed by a multitude of legal systems and regulatory regimes, some of which are new and evolving. As a result, the Fund, the Adviser and their respective affiliates are subject to a significant number of legal, tax and regulatory risks, including changing laws and regulations, developing interpretations of such laws and regulations, as well as existing laws, and increased scrutiny by regulators and law enforcement authorities. Some of this evolution may be directed at the alternative fund industry in general, or certain segments of the industry, and may result in scrutiny or claims against the Fund or the Adviser directly for actions taken or not taken by the Fund or the Adviser. There remains significant uncertainty regarding the full impact that such legislation and the regulations being proposed and promulgated thereunder will ultimately have on the Fund, the General Partner and the Adviser and the markets in which they trade and invest.

In addition to the legal, tax and regulatory changes that are expected to occur during the term of the Fund, there may be unanticipated changes. The legal, tax and regulatory environment for alternative investment funds, investment advisers, and the instruments that they utilize is continuously evolving. Such uncertainty and any resulting confusion may itself be detrimental to the efficient functioning of the financial markets and the success of certain investment strategies. Further, the ability of the Fund to pursue its investment strategies may be adversely affected due to additional regulatory requirements or changes to regulatory requirements applicable to the Fund, such as requirements that may be imposed due to other activities of the General Partner, the Adviser or their affiliates or as a result of the investment in the Fund by certain investors or types of investors.

Any changes to current regulations or any new regulations applicable to the Fund, the General Partner and/or the Adviser could have a material adverse effect on the Fund (including by imposing material costs on the Fund, reducing profit margins, reducing investment opportunities, requiring a significant restructuring of the manner in which the Fund is organized, marketed or operated or by otherwise restricting the Fund, the General Partner and/or the Adviser). In addition, the Fund, the Adviser and/or their respective affiliates face the continuing risk of pending and potential litigation and regulatory enforcement action. These risks are often difficult or impossible to predict, avoid or mitigate. Any such litigation or regulatory enforcement action could materially adversely affect the Fund.

Termination of Interest in a Portfolio Investment. A portfolio investment may, among other things, terminate the Fund’s interest in such portfolio investment if the Fund fails to satisfy any capital call by such portfolio investment or if such portfolio investment determines that the continued participation of the Fund in such Portfolio Investment would have a material adverse effect on such portfolio investment or its assets. The Fund may fail to meet a capital call if a Limited Partner fails to honor a capital call and such shortfall cannot be made up by the other Limited Partners, a new investor, a borrowing, the General Partner, the Adviser or otherwise.

Investments in Transformational Secondaries. The Fund intends to invest primarily in Transformational Secondaries These transactions generally entail a restructuring or recapitalization of a private equity-managed company or portfolio, a private equity fund, or its manager. Typically, Transformational Secondaries transactions involve providing optional liquidity to investors in a private equity fund and/or providing tactical growth equity capital to support growth within specified assets in a private equity portfolio. The objective of the Fund is to invest principally in single-asset or concentrated Transformational Secondaries, a growing subset of the GP-led secondaries market that AIP believes represents an emerging and potentially attractive risk-return opportunity. The Fund generally will not seek to invest in more traditional secondaries transactions, such as purchases of portfolios of limited partner interests in multiple underlying funds. Investing in Transformational Secondaries involves risks not present, or present to a lesser extent, in more traditional secondaries investing.

Transformational Secondaries will often offer less diversification than traditional secondaries investments. For example, Transformational Secondaries may take the form of investments concentrated in one or a small number of underlying funds or portfolio companies, such as a fund restructuring, a sale of a cornerstone investment, or a single-asset secondary transaction. Investments in such Transformational Secondaries are expected to result in the Fund being more concentrated in a smaller number of investments than it would have been had the Fund pursued a more traditional secondaries investing strategy. Limited diversification may cause the performance of the Fund to be substantially adversely affected by the unfavorable performance of a small number of investments. While the Fund expects to utilize risk management techniques in evaluating and investing in such Transformational Secondaries, there can be no guarantee that such measures will be successful. The Fund’s concentration restrictions or other diversification considerations also may make it difficult for the Fund to pursue certain Transformational Secondaries. For example, a single asset deal may involve a transaction size that is too large for the Fund to consummate or to consummate without the involvement of other members of a purchasing syndicate.

Transformational Secondaries may present risks arising from conflicts of interest between Portfolio Investment sponsors and their fund investors. For example, in a GP-Led Transaction, the fund general partner may be in a position to benefit from a transaction, e.g., by crystallizing unrealized carried interest and/or from the opportunity to receive carried interest with respect to post-transaction appreciation in the assets which would not be possible in the absence of the restructuring. Such benefits may dis-incentivize the fund general partner from negotiating a purchase price for the interests being sold that reflects their full value. In addition, information asymmetry between the fund general partner and the existing limited partners in the restructured fund, together with disparities in resources, expertise and available advice, may place such limited partners at a disadvantage to the restructured fund general partner and/or the new investors backing the GP-Led Transaction that could call into question the fairness of the transaction, including the price at which the positions of the existing limited partners are purchased. It is possible that the existing limited partners that remain in the restructured fund could bring claims against the general partner if the value of the portfolio were to lose value following a transaction. Conversely, the prior limited partners that sold their positions in the restructured fund could seek damages if they believed that the transaction price reflected less than full value. In addition, regulators, such as the Securities and Exchange Commission, have focused and continue to focus on conflicts of interest inherent in GP-Led Transactions. Actions by current or former restructured fund limited partners or by regulators, including those that allege that the restructured fund general partner did not fulfill its fiduciary duties to investors with respect to the restructuring transaction, have the potential to materially adversely affect the value of, or the ability to realize the value of, a portfolio investment in a GP-Led Transaction or other Transformational Secondaries involving similar conflicts of interest.

Leverage. Ashbridge II and the portfolio investments will use leverage in their investment strategies. Leverage may take the form of loans for borrowed money (e.g., margin loans) or derivative securities and instruments that are inherently leveraged, including options, futures, forward contracts, swaps and repurchase agreements. The Fund or portfolio investments may use leverage to acquire, directly or indirectly, new investments (including prior to the Fund’s initial closing or final closing). The Fund or portfolio investments may leverage existing investments to permit distributions or additional investments, facilitate the Fund’s hedging activities, meet capital calls of portfolio investments or portfolio companies, pay expenses and bridge fundings for investments in advance of capital calls. The use of leverage by the Fund or the portfolio investments can substantially increase the market exposure (and market risk) to which Ashbridge II’s and the portfolio investments’ investment portfolios may be subject. The use of leverage will result in interest charges or costs, which may be explicit (in the case of loans) or implicit (in the case of many derivative instruments) and, depending on the amount of leverage, such charges or costs could be substantial. The level of interest rates generally, and the rates at which Ashbridge II and portfolio investments can leverage in particular, can affect the operating results of Ashbridge II and the portfolio investments. The portfolio investments may be exposed to leverage at multiple levels, including borrowing at the portfolio company level, the underlying fund level (e.g., in the form of a capital call facility), borrowing at the level of the Fund and transaction-based leverage.

Subscription-Based Credit Facilities. The Fund expects to utilize subscription-based credit facilities on a long-term basis in advance of calling capital from investors. For administrative convenience, capital calls may from time to time be made in “batches” or larger, less frequent capital calls, with the Fund’s interim capital needs coming from its credit facility. Batching capital calls may increase the risk of potential defaults by Limited Partners as a result of there being larger capital calls. To the extent a credit facility obligation is due upon demand by a lender, such a demand may be issued at a time at which liquidity is generally constrained, potentially resulting in greater defaults as a result of liquidity constraints and/or investors facing similar capital calls in multiple funds and being unable to satisfy all such demands simultaneously. Finally, the existence of a subscription facility may impair a Limited Partner’s ability to transfer its interest in the Fund as a result of restrictions imposed on such transfers by the lender. The interest rate on a subscription-based credit facility is typically less than the rate of the preferred return and the preferred return does not accrue on such borrowings (and only accrues on capital contributions when made). As a result, use of a subscription-based credit facility (or other long-term leverage) will result in a higher or lower reported IRR than if the facility had not been utilized in lieu of capital contributions, may reduce or eliminate the preferred return received by Limited Partners and accelerate or increase distributions of carried interest to the Special Advisory Limited Partner. Therefore, the Adviser has an incentive to cause the Fund to borrow under a credit facility and hold such borrowings outstanding in lieu of calling capital from investors and the Adviser may benefit from operating the Fund in this manner and the Special Advisory Limited Partner may receive disproportionate benefits from such borrowings.

Investments Longer than the Term. The Fund’s investments may not be advantageously disposed of prior to the date the Fund will be terminated, either by expiration of the Fund’s term or otherwise. The Fund may have to sell, distribute or otherwise dispose of investments at a disadvantageous time as a result of dissolution. During the course of dissolution, the General Partner (or the relevant liquidator) will seek to convert such assets of the Fund to cash or cash equivalents but there can be no assurance with respect to the time frame in which the winding-up and the final distribution of proceeds to the Limited Partners will occur.

Tax-Related Risks. An investment in the Fund involves complex U.S. federal income tax considerations that may differ for each investor. Prospective investors are urged to consult their own tax advisors with specific reference to their own situations concerning an investment in the Fund.

Epidemics and Other Health Risks. Many countries have experienced outbreaks of infectious illnesses in recent decades, including swine flu, avian influenza, SARS and the 2019-nCoV (the “Coronavirus”). In December 2019, an initial outbreak of the Coronavirus was reported in Hubei, China. Since then, a large and growing number of cases have been confirmed around the world. The Coronavirus outbreak has resulted in numerous deaths and the imposition of both local and more widespread “work from home” and other quarantine measures, border closures and other travel restrictions, causing social unrest and commercial disruption on a global scale and significant volatility in financial markets. In March 2020, the World Health Organization declared the Coronavirus outbreak a pandemic.

The ongoing spread of the Coronavirus has had, and will continue to have, a material adverse impact on local economies in the affected jurisdictions and also on the global economy, as cross border commercial activity and market sentiment are increasingly impacted by the outbreak and government and other measures seeking to contain its spread. The global impact of the outbreak has been rapidly evolving, and many countries have reacted by instituting quarantines and restrictions on travel. These actions are creating disruption in supply chains, and adversely impacting a number of industries, including but not limited to retail, transportation, hospitality, and entertainment. In addition to these developments having adverse consequences for certain portfolio companies and other issuers in or through which the Fund invests and the value of the Fund’s investments therein, our operations (including those relating to the Fund) have been, and could continue to be, adversely impacted, including through quarantine measures and travel restrictions imposed on our personnel or service providers based or temporarily located in affected countries, or any related health issues of such personnel or service providers. Any of the foregoing events could materially and adversely affect the Fund’s ability to source, manage and divest its investments and its ability to fulfil its investment objectives. Similar consequences could arise with respect to other comparable infectious diseases.

Prospective investors should note that, given the significant economic and financial market disruptions currently occurring and anticipated in connection with the COVID-19 outbreak, any information provided regarding valuations, targets and/or prior performance of the funds mentioned herein and their investments and the Investment Managers/AIP’s and/or its affiliates’ assets under management may not fully reflect the impact relating to the outbreak and it is expected that the valuation and performance of certain of the investments mentioned herein will be materially adversely impacted for future periods (at least in the short term).

This material has been issued by any one or more of the following entities:

EMEA

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Outside the US and EU, Eaton Vance materials are issued by Eaton Vance Management (International) Limited (“EVMI”) 125 Old Broad Street, London, EC2N 1AR, UK, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority.

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MIDDLE EAST
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ASIA PACIFIC
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Japan
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