The Pragmatist

Q: Everyone seems to be focused on Asia, but what do you see as the biggest hurdles as cash - and at times unfamiliar investors - continue to come into a region which is still relatively immature compared to the US or Europe?

A: From a JPMorgan perspective, we've been in Asia for a very long time, and we've seen the changes. So, our challenges are the need to be very disciplined and very selective, and to be local. I think that's really key - being local in each of the countries that you plan to operate in and invest in.

Q: How does Asia fit into your overall picture? And where does your focus lie in the region?

A: We tend to talk less about Asia per se, and more about different countries in Asia. After that we look at developing Asia [as a region] very differently in light of the differences in the economies and stages of development. Our principle focus the last five, six, seven years has been China, largely because of the broad economic growth, the good demographics, good educated work force, growing middle class consumer and then - most importantly - a good private equity culture. Plus, there is the fact that you can buy relatively fast-growing, young companies at attractive valuations, particularly relative to public markets.

Q: Taking a step back from Asia, from where you're sitting in New York, what do you pinpoint as the top two challenges the private equity industry is facing right now?

A: The biggest challenge is just the global economic and business environment, so I think that's challenge number one. Challenge number two is, potentially, some of the regulatory changes that we're seeing, especially in the US and in Europe - and whether they'll have an impact on how capital flows and how business operates. To me, those are probably the two biggest things.

Q: To bring up one specific regulatory change, can you discuss your view on the Volcker Rule? Do you think it will affect your business?

A: I don't think it's going to have that much of an impact on our business, bottom line. We principally manage money for institutional clients and we'll continue to do that, so I don't think it will have a significant impact. But I do think it will have some broader impact because you won't see a cycle of active participation from financial institutions.

Q: With 20/20 hindsight, what can you say about the industry's view of itself over the past few years?

A: Looking at different people in different firms, we said back in 2007 that the private equity industry itself wasn't really as smart as it thought it was in 2006 and 2007. Yet, many of the mistakes that have since been exposed probably suggest that the industry is not as dumb as it had looked over various points over the last couple of years ... But one of the things that we do feel pretty good about is the fact that in '05, '06 and '07 we largely missed the big buyout space, and so therefore weren't concerned about some of the exposures that other people had [in that space].

Q: Has the financial crisis altered your approach, your process or the way that you conduct due diligence?

A: I don't think that the financial crisis has really changed the way that we do due diligence. I mean, we're still extremely thorough, and we still spend a lot of time on strategy. Certainly at different points in 2009 and 2010 we've looked for different strategies to adjust to the changes that the market has presented, but for the most part, the due diligence process and decision-making process really hasn't changed.

To see more of Unrein's interview, check out AVCJ TV.

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