Q&A: Baring PE Asia's Jean Eric Salata

Q: At which point did you realize that the latest fund would exceed expectations?

A: Early on in the fundraise we received a very strong response from investors, particularly from existing investors, so we knew we were going to have a lot of demand. We wanted to accelerate the fundraising process in order to minimize the amount of the distraction to the team. Even in that first close we had the difficult situation of having to allocate to investors less than what they were looking for in order to accomodate all our existing LPs.

Q: Has the broader LP appetite for Asian private equity has improved?

A: I think people have generally had better returns out of their North American private equity portfolio funds in the last 3-4 years because of the strength of the US market. However, since Asia has been underperforming - from a relative valuation market standpoint - now is not a bad time time for LPs with a more balanced, or contrarian, view to take some of those North American distributions and re-deploy them in an environment where there is more dislocation, and where you may be able to get better value, and where public markets are trading well below historic highs.

Q: What issues do LPs focus on when deciding to commit to the region?

A: The main issues are returns, realizations, and cash distributions, and your ability as a team to maintain those going forward; I think the Asian GPs raising capital right now are the ones that have demonstrated the ability to give money back to investors. You hear a lot about the lack of distributions in Asia, and that is probably true on average for the industry, but if you break it down between those that are getting distributions back to investors versus those that are not, you can see that realized returns are the key factor in fundraising.

Q: What is it about Baring's investment strategy that you feel appeals to LPs?

A: We are not a country fund, and we are not purely a leveraged buyout shop or growth equity fund. We cover a wide range of different geographies, including Japan and India, which some firms exclude. I think a combination of all those, our track record on distributions, and the team's stability is something that appeals to investors. Our 19 years of investment experience gives our LPs the confidence that we can navigate whatever the future throws at us in terms of the economic cycle.

Q: How have you expanded your resources and team to deploy this larger pool of capital?

A: Our footprint already covers the entire region and the team has more than doubled since the last fund - so we have gone through the expansion phase that we needed to anticipate this fund. We have also been recruiting people from business school into our entry-level positions; we have been adding to our operations team; and we have been adding people with more sector capabilities. Going forward we will continue to grow in a more measured way.

Q: How has the deal landscape changed in recent years and what opportunities are you targeting?

A: Deal flow has evolved over the last 4-5 years. We are not really doing anything different now to what we have been doing for the past five years but the market has changed and there are now more buyout opportunities and even larger minority deals. This has been happening for quite some time. If you look at 2014, we invested about $1 billion in equity with a total transaction value of about $6 billion. However, there was flow in both directions and in the same period we distributed something like $800 million to our LPs.

Q: What is your assessment of the exit environment?

A: The exit environment is a little challenging right now for IPOs in general but last year we had two offerings in Hong Kong - China Shengmu Organic Milk and waste water treatment business Kangda International Environmental. Other than that, we were able to secure a few trade exits including Primo Japan, a big stake in our Indonesian flight services business Cardig Aero Services, and Net Japan. If you look at the bulk of the capital we distributed last year, much of it came from trade sales, but it is cyclical. I also think we are going to see more secondary sales, which is a very healthy development for the industry as a whole.

Q: Do you anticipate more cross-border transactions, such as your investments in UK fashion chain Cath Kidston, and Grenada-based St. George's University?

A: These kinds of cross-border deals are a very interesting area. We are spending more time there and we see it as a big growth opportunity. If you look at Cath Kidston - which involved a PE seller - all of the growth is coming from Asia and we were brought in with view to creating more value because of our capabilities in the region. The St. George's investment is a similar situation where you have an established business in the US in a sector where we have strong knowledge and capabilities. Increasingly, you will find that those GPs able to do something different with a company are the ones that generate top-quartile returns.

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• Topics
• Fundraising
• Buyout
• GPs
• Baring Private Equity Asia
• buyout
• Fundraising
• Asia
• Jean Eric Salata