Taiwan PE remains a tough sell for LPs – AVCJ Forum

“When I ask global investors if they have any interest in Taiwan GPs, many of them have the same comment: ‘The Taiwan market is so small, and they do the same thing as the China GPs, so why should I commit to a Taiwan fund? I should just choose a Chinese fund,’” Andy Tsai, a partner at StepStone Group, told the AVCJ Taiwan Forum.

This perception of Taiwan’s investment opportunities as mostly domestically oriented, offering limited options for reaching significant scale, has made it hard for local fund managers to attract overseas capital. Even Asian institutional investors tend to neglect the island in favor of other developed markets in the region that are perceived to provide more global growth prospects.

“About 90% of our investments are still in mainland China, but we’re trying to build a more diversified overseas portfolio,” said Lili Zheng, an executive director for fund investments at Ping An Insurance. “We started with developed markets, like the US and Europe, and now we’re trying to move forward to the Asia area. But we decided to start with Japan, which will probably be the focus for the next couple of years.”

StepStone’s Tsai noted that in recent years Taiwanese GPs have begun to display more sophistication in their investment strategies, with a growing appetite for middle market control deals sourced through local industry connections and aimed at enabling regional expansion. Global or pan-regional GPs could then acquire these companies once the plans have matured.

The potential for creating an exit pipeline of this nature is an indication of the maturity of the island’s PE community and one factor that keeps LPs interested in Taiwan. While investors believe local GPs’ biggest strength will likely remain in the domestic market, this does not have to represent a limitation if managers are able to take advantage of developing regional trends.

“Our feeling is that the enterprise services sector in Asia is going to fly over the next 20 years, and Taiwan has a first-mover advantage here on both the hardware and software sides,” said Jun Qian, general manager and head of investments for China at Schroder Adveq Beijing. “Taiwan has been building its lead in these areas for more than 18 years, which makes it very well-positioned.”

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• Topics
• Greater China
• GPs
• LPs
• Fundraising
• Buyouts
• Taiwan (China)
• AVCJ Events
• Stepstone
• Ping An
• Adveq Management AG