LPs see potential despite shallow Indonesia GP field - AVCJ Forum

"In 2006-2007 there were four private equity firms and there have only been two new players since then. It's still very early but it's a bit discouraging that after 10-11 years you don't have much depth to the PE market," said Andreas Sylverius, senior investment officer at the International Finance Corporation (IFC). "Only Northstar has gone beyond Fund II."

AVCJ Research has records for around a dozen Indonesia-focused private equity funds, although some of the more recent vehicles have included small allocations for other Southeast Asian markets. Ten of these funds have been raised by the first wave of GPs: Northstar Group, Saratoga Capital, Quvat Management and Ancora Capital.

In 2011, with investor interest in Indonesia soaring, Northstar raised $820 million for Fund III while Saratoga closed its third fund - and second institutional vehicle - at $600 million. Both funds were heavily oversubscribed. Around the same time, a host of other managers sought to enter the space, but only two succeeded: Falcon House Partners and Capsquare Asia Partners.

IFC was an early supporter of Saratoga, but did not invest in the most recent fund. It also backed Falcon House's debut fund and has made a commitment to the successor vehicle, which is currently in the market. While Sylverius said "the track record in terms of realized exits is not that long" in Indonesia, he is happy with the performance of IFC's portfolio GPs.

Markus Bracht, vice president at German development finance institution DEG, offered a similar perspective. The group's Indonesia exposure is relatively short-lived, with much of the realized returns coming from a single co-investment.

Melissa Kang, executive director at Morgan Stanley Alternative Investment Partners, added that fund returns should be the only criteria used to assess the performance of young managers. "It is more about team stability, ability to source deals and ability to add value to the portfolio," she said. "We are seeing evidence of that coming out of Indonesia."

Although Morgan Stanley is looking at the venture capital space with a view to capitalizing on the technology boom, most LPs prefer generalist managers for Indonesia. This is a function of the reasonably shallow investment pool for small and mid-size managers. "There are many small and medium sized enterprises in Indonesia, but for various reasons many are not investable," IFC's Sylverius said.

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• Topics
• Southeast Asia
• LPs
• GPs
• Indonesia
• Morgan Stanley
• International Finance Corporation
• German Investment and Development (DEG)