VIDEO: Warburg Pincus' Charles R. Kaye

"We did have an international companion fund in the late 1990s when the firm had begun to invest more internationally. We have done it more recently last year with an energy companion fund, given the size and scale of the opportunity. But we have always liked the core diversified fund because it keeps the sense of risk and reward absolute," Kaye says.

The global fund enables Warburg Pincus to be flexible in its response to changing opportunities across different industries, geographies and stages rather than be locked into a particular area when the investment environment is unfavorable.

Kaye moved to Hong Kong in 1993 and established the firm's regional operation the following year. He has since witnessed China and India become Warburg Pincus' largest markets outside of the US in terms of capital committed. "It probably still represents the most interesting time of my life in terms of the chance to see that transformation of that part of the world," he says.

On a global level, Kaye sees the key issue as "the world of abundant capital," which puts pressure on the investment community to find rates of return that, for LPs, are consistent with liability structures, and for GPs, are consistent with the promises made to LPs. The phenomenon is present at the buyout end of the market in the availability and cost of leverage, and the impact this has on pricing, and on the growth side, particularly in technology sector valuations.

Warburg Pincus is an active investor in technology companies in China and India. Kaye says he is concerned about frothy valuations - "I don't think there is any doubt that it is beyond exuberant, that a bubble exists in that space" - but observes that there will still be big winners among the inevitable swathe of less successful investments, and expresses confidence in Warburg Pincus' portfolio.

"There's no doubt that there is also a lot of money invested in things that will in hindsight not have been productively employed," he adds. "But more broadly, a lot of this is creating capacity and infrastructure in that part of the world that will lay the seeds for a whole series of interesting economic developments."

Kaye will be making a keynote address at the AVCJ Forum in Hong Kong, which runs from November 3-5. For more information, please go to www.avcjforum.com.

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