LPs adapt to growing sophistication - AVCJ Forum
As the Asian private equity industry continues to grow, LPs told the AVCJ Forum that they are encouraged by its similarity to the development of other markets.
"I think what we're experiencing here in Asia is a bit of pattern recognition that has happened already in Europe and happened previously before that in the US," said Michael Taylor, managing director at Harbourvest Partners. "It's a migration away from the big pan-regional type funds to much more country specific picks, where you're going to find hopefully more outperformance and differentiation."
Weichou Su, a partner at StepStone Group, said that the firm holds the GPs it supports in Asia to the same standards as those it sees in the rest of the world. These standards include the existence of a track record that the investors can measure, along with the team cohesion and fund strategy.
Co-investment and direct investment strategies are also playing an increasing role in the Asian market. Marcus Simpson, head of global private equity at QIC, said the growth of direct investment has "probably been the largest evolution on the investor side" since the global financial crisis. While he acknowledges that many GPs "think we will fall on our face," the potential for success is there if the LP can work with existing managers to build a successful program.
While management fees can be a sore point in negotiations, the LPs present said that they recognize the need for them, even in the evolving market. Ralph Keitel, principal investment officer at International Finance Corporation (IFC), said it is up to the investors to determine whether the fees charged are appropriate to the market.
"We're an LP who actually does pay 2/20 quite regularly. It's not that we don't have the leverage to negotiate, but in many cases our fund managers really do need the 2%," said Keitel. "The budget really is key for us. If a GP comes to us and asks for 2%, we look at the budget, and if we feel that 2% is an appropriate fee level, we'll pay that."
The AVCJ Forum is being held in Hong Kong from November 3-5. For more information, please go to www.avcjforum.com.
More on LPs
Latest News
Asian GPs slow implementation of ESG policies - survey
Asia-based private equity firms are assigning more dedicated resources to environment, social, and governance (ESG) programmes, but policy changes have slowed in the past 12 months, in part due to concerns raised internally and by LPs, according to a...
Singapore fintech start-up LXA gets $10m seed round
New Enterprise Associates (NEA) has led a USD 10m seed round for Singapore’s LXA, a financial technology start-up launched by a former Asia senior executive at The Blackstone Group.
India's InCred announces $60m round, claims unicorn status
Indian non-bank lender InCred Financial Services said it has received INR 5bn (USD 60m) at a valuation of at least USD 1bn from unnamed investors including “a global private equity fund.”
Insight leads $50m round for Australia's Roller
Insight Partners has led a USD 50m round for Australia’s Roller, a venue management software provider specializing in family fun parks.