LPs call for better communication from Asian GPs - AVCJ Forum

In a panel discussion for the AVCJ Southeast Asia Virtual Forum, the LPs remarked that Asia-based GPs have not been as forthcoming in their LP communication versus their European or North American peers in recent months.

“There is a marked difference in the type and depth of the communication among [GPs from] the East and the West,” said Saifulbahri Hassan, a senior vice-president at Malaysia's Kumpulan Wang Persaraan (KWAP). “I may be generalizing but Western GPs are quick to put up placeholders [outlining potential adverse impact] and the response [to questions] has been quicker.

“It may be attributed to the fact that saving face is common in Asia, and people want to be accurate before putting out detrimental information.”

Other panelists echoed Hassan’s view, pointing out that different LPs were receiving differing treatment and that a lot of information requests had to be initiated. This has made it difficult for LPs to respond to their boards and other stakeholders. Alicia Gregory, head of private equity at Future Fund, added that early but partially accurate missives would be more helpful than late yet accurate communication. 

A relative lack of experience in crisis management was also said to be to be part of the problem.

“People in the West have been through the financial crisis when they had to start [such processes] from scratch. A lot of GPs [in Asia] have not lived through that and are re-learning from what we want,” added Sam Robinson, a Singapore-based managing partner at North-East Private Equity Asia. “The transparency has been good, but you have to ask for it.”

Other concerns focused on the effect of currency volatility and the difficulty in obtaining mark-to-market valuations from local or regional funds. Both make it challenging for LPs to gauge the impact of the COVID-19 on their private equity allocations.

Nevertheless, the lower use of leverage by funds in the region and buoyant macroeconomic, demographic and technological headwinds were noted as reasons Southeast Asia should be able to ride out the COVID-19 storm.

With many funds continuing to make minority investments, LPs also advised fund managers to ensure portfolio companies shore up liquidity. Sunil Mishra, a partner at Adams Street Partners, said that private equity funds, in particular, have acted swiftly on this front.

“We are keeping our eye out the longer this goes on, but there are more similarities than differences between regions,” said Josh Stern, a director of private investments at the Robert Wood Johnson Foundation.  

Stern added that the evolving impact of US-China trade and geopolitical tensions on the region’s technology ecosystems could lead to the rise of a number of local and regional champions. He expects  GPs to be able to take advantage of these trends even as Chinese, North Asian, Indian and Western companies continue to look to the region for expansion opportunities.

The inability to travel internationally has also made it difficult for LPs to commit to new relationships, but increased familiarity with virtual modes of communication could lead to greater allocations to smaller funds that were previously overlooked.

However, in-person meetings to finalize due diligence processes are expected to remain important. Commitments to funds in the region are therefore expected to be affected until international travel resumes.

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• Topics
• Southeast Asia
• LPs
• Future Fund
• Adams Street Partners
• Kumpulan Wang Persaraan
• Robert Wood Johnson Foundation
• North-East Private Equity Asia
• AVCJ Events