LGT opens Beijing office as part of differentiation drive

The office, which is led by Frankie Fang, LGT's China representative since 2007, officially opened on Tuesday and will be staffed up over the next 12-18 months. They will operate as part of LGT's global private equity team, working with Hong Kong-based colleagues on due diligence and portfolio management across primary fund investment, co-investment and secondaries in China.

While the move is recognition of China's increasingly important role in global private equity, it also reflects the fact that, just like GPs, fund-of-funds must offer more to their investors than just plain vanilla China exposure.

"Historically, a lot of GPs did China from Hong Kong and as their business matured they built teams onshore," said Doug Coulter, partner and head of Asian private equity at LGT. "LGT opening this new office reflects the maturing of the fund-of-funds industry in Asia where China is the key market. We want to differentiate our capital by growing and deepening our business on the mainland. If capital is not differentiated in China you are going to struggle. The same goes for the many GPs we are partnering with there."

LGT has 10 direct GP relationships in China - in some cases it has invested in multiple funds with a single manager - as well as exposure to the country through global private equity firms and through co-investment and secondary deals.

The China-related portfolio is expected to expand at a measured pace, but the crux of the differentiation argument is that the strong returns generated by many early-vintage GPs will only be replicated by a few managers in the future. This is unsurprising given the increased competition for deals. Fund-of-funds are therefore under pressure to pick winners and they need good information to do this.

"To be really efficient you need to have a team on the ground," Coulter added. "You get a very good perspective on China sitting here in Hong Kong but you get a different perspective in Beijing - there are different information flows."

LGT is headquartered in Pfaeffikon, near Zurich, and its other investment offices are located in New York and Hong Kong. The latter, which has a staff of 22, will remain the firm's Asia hub. Globally, the firm employs more than 80 private equity professionals and has close to $20 billion of PE capital under management on a discretionary basis.

Last month, LGT reached a final close of $2 billion on its latest global secondaries fund. The vehicle was oversubscribed, with Asian institutions accounting for about 19% of the investors.

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• Topics
• LPs
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• Greater China
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• Fund-of-funds
• China
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• LGT Capital Partners