Weekly digest - May 12 2021

12 May 2021

TALKING POINTS

PERSON OF INFLUENCE

David Swensen, the head of Yale University’s endowment who died aged 67 following a battle with cancer, has been lauded for pioneering a new approach to institutional investment management. The “Yale Model” – characterized by broad diversification, prioritizing equity-related asset classes over those with lower expected returns, and an appetite for illiquidity – has been widely copied in the endowment and foundation community.

In an Asia context, Swensen is known for having played a key role in the early development of Hillhouse Capital. Lei Zhang, the firm’s founder, attended Yale and worked part-time at the endowment during his studies. The endowment ended up making a $20 million seed investment in Hillhouse. Paying tribute to his former mentor, Zhang observed that backing Hillhouse was a significant leap of faith, given the team’s lack of investment experience.

“I’ve asked David before why it was that he invested in Hillhouse, at the time when surely no other institutional investor would have taken the chance. He said, when you work with the right people, something good is bound to happen. This has become a mantra now at Hillhouse, 'Spend quality time with quality people.' I think this is perhaps the most important lesson there is about investing, and David knew it by heart,” Zhang said.

TALKING POINTS

PLACE YOUR BETS

Prime assets in Australia’s gambling industry are being targeted by private equity, with The Blackstone Group and Oaktree Capital part of competing bids for casino operator Crown Resorts and Apollo Management targeting Tabcorp Holdings’ sports betting assets. It is apparently not part of a new wave – akin to the rise of sports betting in the US – but rather simple opportunism. Crown is beleaguered by money laundering investigations and the potential withdrawal of casino licenses. Tabcorp, meanwhile, took a hit due to the cancelation of sports events and the closure of betting shops during COVID-19. The company’s lotteries operation was relatively unaffected, so Apollo is testing its willingness to separate the two.

These are not small deals - $6.5 billion for Crown and $3.1 billion for Tabcorp - and strategic investors are circulating both companies. The willingness of private equity to pay up for assets in a still uncertain global macro environment might be tested as well.

DEAL FOCUS

PERFECT DIARY'S INDONESIA EQUIVALENT

DEAL FOCUS

THE E-COMMERCE AGGLOMERATION EFFECT

DEAL FOCUS

BIBIT RIDES THE ROBINHOOD WAVE

By the numbers

AVCJ RESEARCH

STAR LOSES ITS SHINE

In the first quarter of 2020, Shanghai’s Star Market underlined its rapid ascent by accounting for 57% of the proceeds from PE-backed Chinese IPOs globally. Here was a route to market that involved lighter-touch regulation, which sped up the listing process, and offered exposure to mainland investors. Or so everyone thought. The total rose from $3.2 billion in the first quarter to $6.8 billion in the third, but it has declined in each subsequent quarter. This comes amid booming Chinese IPO activity in Hong Kong and the US. The Star Market share of PE-backed offerings was 23% in the first quarter of 2021 as a string high-profile – and potentially large – listings were pulled. It follows greater scrutiny of IPO candidates in the wake of the Ant Group’s offering being halted in November. Negotiations are apparently ongoing as to how much more candidates should disclose and to whom. Until the situation is resolved, investors may question China’s willingness to embrace reform.

The rest of the week

UPCOMING EVENTS

• May 27 - AVCJ Vietnam Forum

• June 2 - Infrastructure Investors Forum: Energy & Renewables Asia

• June 23 - AVCJ Chinese PE & VC: The outlook for Q3 and beyond

• July 26-28 - AVCJ Australia & New Zealand Forum

• August 2 - Infrastructure Investors Forum Asia

• August 3-4 - AVCJ Singapore Forum

• August 5 - Southeast Asia M&A Forum